Landlord Investing

Every real estate investing deal is an opportunity for both profit and education.  Well my first deal was a good combination of both.  When I decided I wanted to get involved in real estate investing it took me eight months to decide to do my first deal.

This particular deal came as a result of networking in my local real estate investor group.  A local Memphis investor found a deal on a 3 bedroom, 2 bathroom home in a moderate to lower income area where people still like to buy homes.  This was a wholesale deal for the other investor and he assigned his contract to me to close on the deal.  I was buying the property for $58,000 and $5,000 of that went to the investor for assigning the contract to me and $53,000 went to the seller of the property.  I had the cash available so I paid all cash for this deal and for $4,000 in repairs this property needed.  The after repaired value of the property was approximately 95k.  

I had decided I wanted to do a rent to own or lease option deal with this property.  I put a yard sign out with property flyers and had links to a website with inside pictures of the property.  At the time I was doing this a more experienced investor told me I should try to retail the property and take the quick cash and go on to the next deal.  Well as a new investor I wasn’t sure how long it would take for me to find my next good deal so I wanted to get the maximum out of this property.  After about a month(and about $800 in ads) I found a tenant I considered suitable and agreed to take a $2500 option fee plus $875 per month and a sales price of $99,000.  If the tenant pays the rent by the first of the month then $100 counts as pay down towards the purchase price.  If I had sold the property quickly I may have sold for $89k and paid $5k in selling fees and netted about $20k and would have paid about $7k in taxes on that income.  Instead by going after lease option it may take 2-6 years to sell and I should get a $99k or better selling price with much less selling costs and should net about $35k of which about $5k will be taxed as capital gains.  The lease option method will net me about double what retailing would have done, however it would have been nice to have access to that cash for doing more deals.  I think the $15,000 profit quickly would have been better than $30,000 in a couple of years plus the things I could have done with the $62,000 in cash I put into the property.

The tenant I chose has not once in the first nine months paid the rent on time so he hasn’t earned the $100 monthly rent credit, and has on average had to pay an extra $100 each month in late charges.  I don’t expect this tenant will be able to refinance, however his job status and income have been going up while he has been in the property, and the current market value is now $105k.  The tenants father is a mortgage broker and if I get to the point of evicting the son the father has told me to let him catch up the sons rent before filing for eviction so that part is really in my favor.

From a humanitarian perspective I like lease option deals as I am really helping someone who could not rent otherwise.  I will only do a lease option to someone I believe is improving their credit and job situation and should be able to buy the house within 24 months.  With 12 months of on time payments verified by copies of checks many mortgage brokers can get your tenant financed as a refinance type of deal.

In the event the tenant doesn’t buy the property within the first 2 years I can either lease option to another tenant or just try to outright sell the property.  Even though the property provides great cash flow I would rather sell it and get a big check and use the cash to go after the next deal.

Some things I learned on this deal that you can use:  1.  We had a yard sign with flyers in a flyer tube plus links to view pictures on a website.  Before we would show the inside of the property we insisted any prospects should view the pictures online first.  We ran ads in the major local newspaper and we got 20 times as many calls from the yard sign than we did from the newspaper.  However this street had decent traffic, other properties I have are more secluded.  Always use a yard sign and flyer box and have pics online with good descriptions and always highlight the kitchen and bathrooms.  2.   If I had the deal to do all over again I would have retailed the house and tried to sell it quickly.  I could have rolled this deals cash into more and more deals and made much more money.  My opinion now is that every investor who isn’t already financially well off needs to go for the quick income first and progress to long term deals second.  3.  I probably should have waited a little longer for a stronger tenant.  4.  You can not do this type of lease option transaction in Texas now due to some strange laws that got passed in 2005.  However I live in Tennessee and we don’t have any anti-investor state wide laws yet.  We do have a bad local one related to trash left over from evictions but that is minor in comparison.

The nation’s inventory of unsold homes – an important component of a more balanced housing market in the second half of 2005 – is growing steadily in many areas of the country even though buyer demand continues strong, according to the latest HouseHunt, Inc., quarterly “Current Market Conditions” survey.  The percentage of member real estate agents reporting plentiful vs. limited supplies increased from 33% in the first quarter to 38% in April, May and June.   

Exceptions would be South Florida, Arizona, Southern California and certain other housing and job growth hot spots. 

Market equilibrium would be attained when the present 4.3-month national housing supply increases to about six months, or about a 50-50 buyer-seller ratio.

HouseHunt, Inc., is a consumer-oriented Internet firm that provides valuable free information to homeowners, home buyers and home sellers. Survey results are based on Current Market Conditions sales data reported by HouseHunt’s Exclusive Agent Referral Network (EARN) members in 47 states. 

Survey results also included:

• Average national home price appreciation slowed to eight to 10% on an annualized basis in the second quarter as compared to higher, more substantial double-digit price increases in 12-month comparisons in the past two to three years.

• First-time buyer activity declined from 40% in the first quarter of this year to 35% in the second quarter even though mortgage interest rates continued near historic lows and funding is available and relatively easy to find in interest-only and other exotic loans. 

• Nine of 10 home sellers are getting 95% or more of their asking prices. Nearly half of those are getting 100% or more. An overwhelming majority of sellers are still getting multiple offers.

• Sixty-five percent of listings are selling in 30 days or less.

Michael Bearden, president and CEO of HouseHunt, Inc., welcomes the near-term probability of a slower-paced, more balanced housing market: “This would be positive news for consumers, particularly for first time and other entry level home buyers. Slower appreciation and a plentiful supply of unsold homes would certainly energize the entire market in all price ranges. It would also dissipate fears of a housing bubble price collapse.”

HouseHunt’s two primary websites, www.HouseHunt.com and www.moveUp.com, offer consumers free information on local communities, free on-line access to property listings, free on-line sales data on recent home sales in their neighborhoods, free electronic property-matching (where available), buying and selling information, and access to some of the nation’s top-producing and most knowledgeable real estate agents regardless of brand affiliation or geographic limitations.

My third deal as a real estate investor involved almost no money out of pocket for me at all.  The home was in good shape and had only been built about 14 months earlier.  The home is in a neighborhood where several builders had unsold homes on the street making it very difficult to sell a used home.  The seller had an unusual motivation for wanting to be rid of the house: he wanted to forget an ex-girlfriend as he had bought the house to get married and for them to live there.  The seller contacted me through an online lead site and looking over the deal I knew it was in an area that isn’t very good for retailing homes right now due to over building in the area.  So what I did was offer to lease option the property from him.  Like many sellers, the idea of a lease option doesn’t sound that enticing.  Most sellers need all cash and have no equity.  Well my seller had a little equity, didn’t need any walking money, and knew he couldn’t sell the home otherwise and had been trying for a few months with no luck.  

After about a month the seller contacted me again about doing the deal.  So we met at his house and signed a purchase and sales agreement, a memorandum of option, an option agreement for 72 months, a lease agreement with right to sublet and a seller’s disclosure.  We agreed to a $125k purchase price and a $1038 rental payment.  Other similar homes in the neighborhood were listed at $145k and this seemed like a reasonable deal to me.  I agreed to start paying him rent as soon as I found a suitable tenant/buyer.  

I paid to run an ad in the local paper which was my only expense.  I had several interested people and took applications from a couple of prospects and selected the best applicant.  We received a $3500 non refundable option fee towards the future purchase of the home at a price of $149k and a rent agreement for $1250 per month with $100 credit towards purchase for every on time payment with a 2 year agreement.  With my tenant buyer we signed a purchase and sales agreement, a lease agreement, an option agreement, pet disclosure, and a couple of other papers.  This is a pretty good deal as I have a decent tenant who can probably qualify for a mortgage within the 24 month time span we agreed upon giving me about a 50% chance they will buy at the end of the option period.   I received a non refundable $3500 check up front against my back end profits which isn’t taxable until the option is exercised, as well as a $212 monthly rent profit.  I expect to make close to $30k profit on this deal once my tenant buyer refinances and cashes me out.

What I did wrong on this deal was agree to pay the rent directly to the seller instead of having the checks made payable to the lender directly.  On a positive note the deal is decently strong and I have good cash flow and if my tenant doesn’t buy I can easily put another tenant buyer in this property and collect another option fee as this is a desirable area.

The city’s charm adds to the convenient exchange rate that sets Buenos Aires as an ideal city for international tourism and furthermore, a mine for investment. The investment opportunities are multiple and the channels are open for independent developments: real estate, independent business, technology, importing, and many more.

An attractive road for foreign investors is within the real estate market. It is a realistic option both for small investors and big economic groups. The initial investment cost for a property is quite low and the return is surprisingly high, in short and long term basis. The cost of property and land is beginning to increase in Buenos Aires due to the high demand for permanent housing and short-term rental. There is in fact a deficit of apartments, what also explains the springing of loads of new developments that are.

The acquisition of a property carries along a series of implicit business opportunities apart from its personal use as a private residence: remodeling and resale, traditional rental, temporary rental, among others.

Short-term rentals is one of the most simple and feasible directions for small investors and most especially for those not currently residing in Buenos Aires. Alojargentina, other than selling properties and providing counseling in real estate, offers a full “Property Management” service. This consists in renting the property to tourists and companies following a short-term manner and in the property’s maintenance according to each customer’s particular needs.

Someone using this service from abroad, for example, can forget about taking care of the property since it can be left in the company’s hands. It is a complete service that includes renting the apartment, the guest’s full assistance, bills and taxes payment, property maintenance and coordination of any required repairs. The proposal anticipates the property owner’s interest in being informed of what is going on with his/her apartment and this is why reports are sent regularly. Customers may choose between a full management or a temporary rent solely management.

Frequent visitors may have their property in Buenos Aires to enjoy during their trips and use it as an extra income source through temporary rent. So, purchasing an apartment in Buenos Aires is an opportunity for a double investment: generating short and long term profit added to having a vacation home in an evermore alluring destination as Buenos Aires.

The apartments apt to be offered for temporary rent have different characteristics but there are certain mandatory requirements such as full equipment, basic amenities and demanded location. The preferred neighborhoods are Recoleta, Downtown and Palermo, but guests often ask for Las Cañitas, Barrio Norte, Belgrano and Puerto Madero as well.

The Real Estate Sales area in Alojargentina specializes in this type of investment. The firm sells properties for personal use but mostly assists on temporary rent investment opportunities. It holds extensive experience in handling sales for foreign citizens and thus has the necessary know how in regards to processes, paperwork and requirements for non-resident buyers.

In this falling real estate market, many people are either unable to sell their homes, or they’re holding on to a house that’s worth less money now than when they bought it. If you are in a similar position and not sure what to do, why not consider donating the property to charity? 

While this may sound like a radical idea, it can actually save you a great deal of stress, energy, as well as thousands of dollars. 

The stress that comes with owning an unproductive property can be immense, as you continue to make monthly payments and perform regular maintenance on a home that is losing value. You’re paying property taxes and other bills each month, the costs of which you know you won’t recoup through a sale. 

By donating your property to charity, you can free yourself from this burden. No more will you have this albatross around your neck; you will be free to put your monthly payments towards more productive investments like new real estate purchases or setting up a retirement fund. 

Selling your home for less than you paid is more than just expensive, it’s depressing! After all the hard work you’ve put into a property, you want someone to appreciate it and to make a fair offer. Especially in today’s market, selling can be a long and arduous process that yields less than desirable results.

When you donate your home, you are given an immense tax break. This tax deduction is based on your home’s current value on the market. You will also save money on real estate commissions if you decide to donate rather than sell. Normally you would have to pay broker fees for both your real estate agent as well as the buyer’s agent. In addition, there are costs for home inspectors, lawyers, and miscellaneous closing costs. In many cases you end up in a better position financially when you donate your home to charity than you would if you endured the lengthy selling process.

You are also able to donate a home while still living in it. By making a “life estate,” you benefit from the tax break, get to enjoy your home, and when you pass away, the title is transferred to the charity. 

Not only can giving your home away save you money, but it can also make you feel great. Helping others is one of the most satisfying things we can do as people. Knowing that your home will go towards a good cause will leave you feeling fulfilled and relieved. Charities have the option to sell the home themselves, or to use the property as it stands. The home may even go to a needy family who need a roof over their heads. While tax breaks are nice, you should never underestimate the power of offering a helping hand.

Spanish property sales – Benalmádena has it all

Spanish property sales is easy in an area with Tivoli, green parks, Selwo Marina with dolphin show, casino and much more

Buyers of a Spanish property will appreciate that Benalmádena is a special town with originally three areas: Benalmádena Pueblo, Arroyo de la Miel and Benalmádena Costa.

Benalmádena is located at the foot of the mountains Sierra de Mijas. 

There are only 15 kms (10 miles) to Malaga Airport, and the motorway is on the hillside giving easy access to the neighbouring towns and villages. 

Commuting by bus and train is also easy. The train runs along the coast between Fuengirola and Malaga, and stops in Benalmádena every 30 minutes.

If you are planning to buy a property for rental, Benalmádena is ideal as the holiday guests do not need to rent a car.

Benalmádena Pueblo

This is a typical beautiful Spanish village (pueblo) with narrow streets and old houses. The tourism has not yet reached the old part of Benalmádena as it is drawn back from the busy beaches, even though it is close to the main attractions of the area.

In Benalmádena Pueblo Spanish property sales are mainly apartments, penthouses and town houses.

Arroyo de la Miel

This area has now turned in to the town centre of Benalmádena. It is rich in small restaurants and shops, and in the middle of everything you can find Tivoli, one of the main attractions. 

Tivoli has entertainment for all ages, offering great fun for the family.

The cable car is located next to Tivoli, taking you to the top of the mountain where you can enjoy spectacular views of the coast and the sea.

In Arroyo de la Miel Spanish property sales is mainly apartments and penthouses.

Benalmádena Costa 

As the name indicates, this part is located on the sea front, stretching several miles in both directions. This is where you find the beaches and lots of life in the summer.

The famous sports harbour, Puerto Marina, is particularly well-known for the cosy atmosphere and the beautiful architecture. This is a lively place with more than 1000 moorings and all sorts of water sports: sailing, water ski, big-game fishing, diving etc.

In Benalmádena Costa Spanish property sales is mainly apartments and penthouses, but moving further along the coast, also villas can be found, making Benalmádena Costa a diverse area for Spanish property sales.

Beth Collingz, International Marketing Director for PLC Global based in Manila, lead Marketing Partners for the Lancaster Brand of Condotels in the Philippines, announced the companies recent US Road Show was another major success bringing in some $8.9 Million Dollars worth of sales for Lancaster The Atrium Condo Hotel as investors look at to solve problems of real estate retirement investing as an alternative to social security systems that are on the verge of going bankrupt and Pension Plans that are failing left and right and will continue to fail as many are glorified ‘Pyramid Schemes’ or rely solely upon the ‘never ending chain’ principal. 

Overseas Filipinos and Offshore Property Investors looking to start saving for retirement, the Philippines with its comparative low cost of real estate yet high rates of Hotel Accommodations, make the Condotel investment an extremely attractive investment proposition. Clients are now looking at the preconstruction investment in a Lancaster Atrium Semi Fitted Studio Suite that may be Purchased on 12 Year Payment Plan Options that provides for Executive Studio [Semi Fitted] Suites to be purchased with a Reservation of only -Pph-25,000.00 for a 32.50sqm [350sqft] Studio then 48 consecutive monthly payments of only -Pph-17,801.58 [No Interest for the first 4 years]. During the first 4 years there is an Annual Lump Sum payable on the anniversary of the reservation date of -Pph-91,551.00 and thereafter continue the 96 consecutive monthly payments of -Pph-24,075.73 to complete the balance of the purchase price Collingz said.

Collingz said Having paid 50 percent of the purchase price within 4 years the Studio Condotel will be ready for occupancy and thereafter income positive with a projected ROI through rentals of at least 500 dollars per month makes the remaining 96 monthly payments on the unit balance self liquidating said Collingz, and with preconstruction property appreciating at some 20-30% per annum not only does the Real Estate Appreciation look good but after paying for the unit, the rental income is in excess of what many Pension Plans offer for the same or similar investment of only 50 percent of the purchase price for the unit.

The potential high rates of rental returns from Condo Hotel Investments, currently from 8% up to 16% per annum, opens up a huge market not traditionally looked at by Real Estate Agents and Brokers whom all so often run around like headless chickens looking for normal residential profile buyers without looking at the by far bigger picture of investments, investing and retirement. We look at Condotels as pure investments. Not primarily as Real Estate. If you look at the Condo Hotel market as investing for future income, and think outside of the box, it is plain to see that Hotel Condominiums are not only real estate investments but more importantly income generating property. Think of Condotels as a Managed Pension Plan. After all, Condotel units are fully managed property. The owner of the property does not have the hassle of renting out the unit and contend with all the normal pit falls of being an amateur land lord. This is taken care of by the Condo Hotel Management said Collingz.

One of my clients from Chicago, just purchased 4 Studio Condotel Suites at Lancaster The Atrium Manila which is currently in preconstruction sales with a plan to retire in 2012. His outlay for the purchase is only around 70 Dollars a day for 6 years by opting to purchase with a 30% down payment on a 6 year no prequalification, no down payment, no interest payment plan. Even before completing payment for the units, he will be receiving more than $2,000 a month in rental income in additional to any Government or Private Company Pension Plan. Apply that to the 12 year payment plan and during the first 4 years prior to completion, where you would only be paying something like 20 Dollars a day, and after the units are already earning rental income, 45 Dollars a day, he would have a cash positive income on 20 Dollars a day or some 600 Dollars a month. Better yet, the rental income is in tune with inflation and buying on preconstruction terms gives real estate appreciation of some 60-80% over 4 years enthused Collingz.

At the end of 12 years, having only put out 50% of the original purchase price of the units, the owner would have earned something like 4,800 Dollars and condo units are now in fee simple, owned free and clear, then earning more than 2,000 Dollars a month. Better yet, as Hotel Rates increase yearly, so does the rental income Collingz said.

Are you going to be able to retire? And if you do, will you be in a position to enjoy your life, pay medical bills and maintain an acceptable level of health?

Those can be chilling questions if you haven’t thought about them much. If you haven’t given them adequate thought, that means you haven’t prepared for certain inevitabilities.

Real estate investment can help you answer those questions and remove that chill factor.

Let’s face it. Not only will you not want to spend your golden years working, you may not be able to, regardless of whether you would like to. You may live well up into your 80s or 90s and be unable to do the job you are doing today—or any job for that matter.

You need to lay the foundation of security and happiness for your future self. Real estate can help you do that.

This is because, as your investments age, they should be making more and more money for you with less and less work output from you. It’s a sort of financial magic that will serve you especially well in later years. That’s why people get into investing in the first place.

In order to prepare for your retirement in this way, however, you must examine your core. That means that you will need to make sure your needs are taken care of in such a way that you don’t have to spend all of your time scrounging for pennies. You need the time to learn about real estate, and working in someone else’s office for peanuts isn’t going to get you that.

According to Robert Kiyosaki, author of the Rich Dad book series, you need to build a business system that can operate without you, thereby making money without working for it. Then take a portion of that money and invest it, thereby exponentially increasing your earning potential. Have you heard of making your money work for you instead of vice-versa? That is what this means.

As you grow older, you should be working less, not more. This is partly because your ability to work will decrease. But it is also because you deserve to be able to work less and enjoy your life more. Retirement isn’t about being forced out of a job—or at least it shouldn’t be. It should be about leaving a job to catch up with your life. To spend time doing the important things like hanging out with family and friends, engaging in hobbies that you enjoy and becoming involved in life-enriching activities such as spirituality or art. Not to mention getting enough exercise.

If you are in a job now that doesn’t allow you to do these things because it doesn’t pay enough or because you don’t have enough time left over in the day to learn to make a change, then consider switching to a job that pays more or gives you more time. Develop a business system in which you can train people to do the work for you. Then, when that is up and running, and providing you with the money and time you need, start learning about real estate.

Put your extra money into real estate investment—but don’t put in more than you can afford to lose on the learning curve. Real estate investment is a skill like any other and you will make mistakes. Don’t be the farm on your first few purchases. In fact, don’t bet the farm at all. Make sure you are making enough money to live on, and then enough money to invest on.

After a while you should see your money start to grow exponentially. Then you are on your way to a happy retirement.