Buying Properties at Wholesale Prices

One of the safest and low-risk investments for your hard-earned dollars is in the real estate market.  This type of investment does not depreciate easily, and the land where structures are built upon appreciates through time. Thus, these investments usually entail a high cost. That is why a lot of people are on a look out for a bargain when it comes to local real estate investments. Here are some secrets of successful businessmen who made it big in the real estate markets by buying properties at wholesale prices.

Study the Market

This is a prerequisite for anyone who wants to make big bucks with a real estate investment. Since prices in different areas and types of real properties may vary, it is good to arm yourself with the knowledge of the price levels of properties in your locality. Check the newspaper ads and property listings. These will pretty much give you an idea on how much real properties are valued in a specific area.

Take it Slow

When planning on making a investment, do not rush. The price differentials can be caused by the time element. The longer a property is listed at an auction, the bigger is the chance that its price will go down. Unless you have very competitive buyers around, take your sweet time in negotiating the deal. Eager sellers will likely agree to a lower price if you do not appear to be in a rush to grab the property.

Also, inspecting the property, and checking for ownership and tax compliance may take time. You should appear to know all this so the selling agent or broker would know that you mean business and would be careful not to overprice their offers.

Fixer-Upper Properties

Foreclosure properties are often in various states of deterioration. Smart investors are on the look out for fixer-upper houses in decent neighborhoods. One type of repair that is especially attractive to the professional investor is a failing home foundation. The cost to repair foundations is easy to calculate with a little experience, but scares off the average investor. Here’s a quick overview from a foundation repair contractor:

Bank Hunting

Look for investment properties from banks and mortgage institutions. They often have properties that they foreclosed from their mortgage holders. Most often, they hold auctions and price the properties wholesale. Remember, these institutions are not really into the business of real estate buying and selling. All they want is to liquidate such assets so they can use it in their core business operations. While some may be careful to price the properties at their real market value, most banks and mortgage companies base the price on the amount they need to recover. And because more often than not, their valuation of the properties at the time the mortgage was made is only around 60 to 70 percent of the appraised value, these properties generally valued lower than the mainstream real estate market.

Buy in Bulk

If you have a deep pocket, you can get a price lower than the published rate if you buy more than one property from an agent or a broker. So it is good to plan how you want to diversify your real estate investment and buy at once. It can be a commercial district building, a residential property and a beach side lot with glorious white sand. If you buy this much, the bank would be very happy to give you a generous discount.

This is applicable when you are into the business of real estate investment. Buying a mix of properties doesn’t only serve to diversify your investment. This also gives you a portfolio that would offer a wide array of potential customers.

Make Friends

It is common knowledge that agents and brokers make a killing with just a single property. Thus, when planning on making a major real estate investment, look for friends in the industry. If you do not have one, make friends out of the existing agents and brokers. It would not hurt their pockets to help you obtain a generous discount for the sake of friendship.

Organize a Group

Persuade your friends to make a real estate investment as a group. Then, you can buy properties from a seller, agent or broker together at wholesale prices. This might be hard to do, unless you have really wealthy friends but it is worth a try given the hefty price tags of most real estate properties.

Go Online

Buy and sell websites abound nowadays and their list of properties sold include investment opportunities in real estate. The main feature that these online stores boast of is the fact the property owners themselves are the ones doing the transactions. Taking the agents and brokers out of the equation would certainly bring down the price tag drastically. Thus, this is equivalent to buying at wholesale prices.

There are precautions to take when transacting online, though. First, because there are no agents to pre-screen the validity of the offer to sell, much less the legal papers that are needed in the real estate investment transaction, you can be duped in the process. Thus, it is important to make sure that everything is done legitimately.

There are also possibilities that the estates for sale do not really exist. Therefore, it is essential to make a visual inspection of the properties in question before making a purchase offer.

Recommended:  Buy Fix and Flip Properties

How to Buy, Fix and Flip Real Estate

Home flipping or real estate flipping is an old revenue-generating strategy. It involves the purchase of land or property, its development through construction of infrastructure or repairs made on the building and the resale at a much higher price; buy, fix and flip real estate.

Before an individual decides to get into the business of home renovation and development, he must ensure that he is ready for what lies ahead. As with every endeavor, going into real estate development involves a vision, planning and ability to overcome challenges.

Before dipping your hands into the industry, you must first study the sector and get as much information available. It would be advisable to start part-time at first and grow your business from there, as you continue to learn more about flipping property and other aspects of real estate development.

Remember that the idea is to buy low or at an affordable price and sell the property at a profit. To be able to do this, you should be familiar with the real estate market. How much is low and how much is high? What kind of property would be sold faster?

Many of those already making a profit in fixer-uppers and flipping would most likely suggest that you start networking with other real estate professionals, especially brokers who can teach you a thing or two about prices and location.

Attend workshops, forums, and events where you meet these people. And not just real estate professionals but also contractors and other people who would help you do home renovation and turn properties around.

Once you’ve met your prospective team – one way or another you will have to bring together a group of people to help you in the flipping business — you must then brainstorm on where to get the funds to buy your very first property.

Some people use their own savings as capital while others rely on loans.

If you don’t have enough capital to buy land or property, you can try borrowing from friends or relatives. You can even turn them into business partners and bring them with you whenever you embark on a renovation project. Or if you are willing to, you can borrow from a bank and include the finance interests in the overall costs.

You may want to start small for your first development project. Among the best buys would be foreclosed houses sold at very low prices. Buy one, preferably in a saleable area, and start the home renovation to see what repairs are needed.

By this time, you should already have a broker or real estate professional in your team who can help you identify a potential property. They will be the most knowledgeable on what areas are good for home flipping.

Nowadays, lists of houses for sale are available from brokerages and banks that also do their own repairs, detailing the condition of the houses in their reports. Banks often offer foreclosed houses. Always be on the lookout for such events, published or announced through newspapers or websites.

Experienced brokers will also be able to help anticipate sales and later on help you sell you repaired or developed property.

When you are going through the home inspection process, be sure to bring your broker and contractor to the property. They must see the place first so they can give an estimate on how much it should sell when repaired and how much the repairs or renovations will cost (be sure to include an inspection of the home foundation). This must be carefully factored in your computations.

Once finished with the inspection, analyze the deal first before giving the green light for the renovation or repairs. First list your total acquisition cost including the closing costs. Then factor in the estimated cost of repairs. Definitely, the sale price should be higher than the two combined. Don’t forget to factor in the commission of your broker, as well as the interests to be paid for the loans.

After you come up with the final amount including your preferred profit, check if it matches or is still within the price range of similar properties in the market. You should always do this before buying the property and again after you have completed the home repairs.

As a businessman, you should be hands-on, especially in the rehabilitation process of the structure. You are still the one in command, directing your contractor what repairs to do and how much to spend.

The initial inspection checklist should have helped you get an idea how long the renovations will take to complete. Watch how your workers manage time. Check if the quality is within your standards. Make sure your contractor is not wasting your precious time and money.

Finally, when everything is done, sell your property. Again, ask the help of your broker and have him invite prospective clients for a home inspection. Don’t settle with an average selling price. Always aim high. If your calculations were correct upfront, you should have a very nice net profit. Buy it, fix it, sell it: Profit!

Related:  5 Fixer Upper Tips

Development Tips

Welcome to Real Estate Development and Investment Tips.  Our purpose is to provide you with the best advice on real estate investing including development strategies, wholesale investments, property inspection and appraisal. Intended for the new and experienced investor in residential and commercial properties.