Project Stocks

Distressed real estate is a the diamond in the rough that all RE investors are seeking. HOWEVER, with out doing your research you may lose far more then you will gain.

A step by step approach is best in order to make a solid decision before commiting to the investment. Make a check list and use it. And dont forget to add these to your list.

Please Note: The following elements discussed are not listed in any particular order. Nor do they all hold the same value in relation to each other, but they must ALL be considered in their entirety. The property should meet at least one of the criteria, and should have no unjustifiable issues in any one single area.

Here is the list I have used:

KNOW WHY ON PRICE

Price is the first thing an investors sees.

So the goal is to buy for cheaper then the current market value and sell within market value or above. so how come the seller is offering such a GREAT price. Is it to settle debt??? Is it due to divorce? Death in the family?

What problems does the property have if any? Old cracked and faulty plumbing? bad electric? If its a older craftsman style home those problems are very common. is the foundation in good order? Dont forget holding costs.

In my opinion the most common over looked profit drainer is underestimating the liquidation costs of holding and selling the property. Things to keep in mind and budget into your holding costs are: commission payments to real estate agents, closing costs, mortgage payments, taxes, plus repair and maintenance costs. Also electric and water.

If your not up on the market your shopping in…your going to loose money.

Check out other property near the one your looking at investing in. what prices are they pulling in? Are they the same size? Lot size close to the one your looking at? Same style of structure?

TAKE ADVANTAGE OF TERMS AND CONDITIONS

Price and location are important this is true. but dont forget about the financing.

In some cases a full price purchase can allow you to leverage the terms to mean a lower intrest rate or smaller down payment.

RESEARCH THE LOCAL MARKET

Experienced real estate investors try to learn everything about the market they are shopping in. Sometimes its the small details that give the property youre looking at the best chance to appreciate. For example: How close is the nearest church? Is the area family friendly? What is the local crime rate… is it close to good school? Where is the closest Fire/police station? Does the neighborhood have a community watch program? Next factor in the local floor plans that surround your target property. Was the last owner primarily concerned with vacancy rates, so they keep prices low instead of upgrading the property? In contrast, your research shows that particular upgrades like air-conditioning, second bathrooms, or enhanced security allow for both lower vacancies and higher rental rates.

LOCATION IS NO TO BE OVER LOOKED

If your shooting for a long term tenet or residence then location is the second most critical thing to look at…however if you have a chance to turn a good profit for a ugly house in a less then 4 star area…that profit might out shine a nice little bungalow on the beach.

FIX AND FLIP AND FORCLOSURES

Most new investors and some seasoned ones, seek out fix and flips and distressed foreclosures for the opportunity to increase the profit margin. If your going this route make sure you have a good eye for the details and a solid understanding of basic home repair.

With small repairs such as painting, minor landscape, and basic flooring, profits may be available but not really worth the risk. More significant profits are found with extremely distressed properties. Plumbing is corroded, the roof needs replacing, and the interior needs to be gutted and remodeled, but the seller is asking 50% of the market value and you can repair it for much less. Always factor in the amount of work that you are looking at?once you have a rough idea of the cost of the expense?add on another 5% as a buffer.

Understand the ZONE

Zoning provides an opportunity to put the property to a higher or better use and is an area many investors ignore. Higher and better use means that the owner is getting the most out of the land. For example, if a lot is zoned for three units but contains a single lot, then it is not getting its highest and best use. Or if a lot is zoned commercial, yet there’s a three unit residential building sitting on it, it is not getting its best and highest use, like a business or a store.

Think of it this way, what could make you more money…a single small house on the land you just invested in…or a duplex on the same land? One tennet or two? Zoning is a gift or a curse depending on your plans with the property…make sure you know before you buy it.

Classic zoning “no-no’s” are garages converted to bedrooms. Non-permitted granny flats and detached garages.