Looking for Investment Property
Location value
For investment purposes, property in the best location will offer the greatest liquidity (shortest sale time) and greatest opportunity for appreciation in a good market. The best location offers the least risk and will depreciate less, even though it will cost more initially. The old axiom is true: buy in the best location you can – even if it’s the worst property.
Stick to your own backyard
Become an expert in a particular area. You will begin to see patterns indicating the value of a specific kind of property in a specific area. Unless this is a strong reason for investing outside you geographical area, don’t.
Be very wary of property advertised outside its geographical area. In general, it’s either overpriced or has a hidden defect that’s kept it from selling in its local market.
Using real estate agents
The easiest way to find property is by using a local real estate professional. By having direct access to the MLS (Multiple Listings Service), they’ll know everything on the market in your price range. In addition, a knowledgeable agent or broker can supply valuable information about market conditions, prices and properties that may be coming to the sale. Also, make sure the agent you chose to work with is successful in the area and with the type of property you are interested in.
Why a third person can make a difference
When dealing through an agent, owners tend to be more objective and have a better negotiation than without an intermediary. Agents are used to working with sellers and can help you tailor your offer to overcome the seller’s objections.
Working without an agent
If you are interested in distressed properties (foreclosures, Sheriff's’s sales, tax sales, etc.), you may be better off without an agent. Agents tend to avoid these situations because there are no funds available for their commission. Distressed properties are often in debt in excess of the property value and would be a waste of time for an agent.
Owners who don’t use agents
In general, owners who try to sell their own property are doing so to avoid paying an agent commission. Often the owner does not have an accurate idea of the value of his property, so one of two things occurs. Either they will under price the property allowing a savvy investor to get a bargain, or, more likely, they will overprice the property based on the fact that it is the price at which they would sell – regardless of the market data. In addition, these are unscrupulous owners who appear unsophisticated, but are really trying to hide a defect. Be wary of dealing directly with owners.
Advertising leads
Begin a regular practice of searching the classified ads for property for sale or lease. Even if you are only interested in buying, a desperate-sounding owner seeking a tenant may be motivated to sell. Look for indications that a seller is under pressure to get rid of the property.
Finding the bargains
If you can buy a property for 20% less than it’s fair market value, then you’ve already made money just by buying it. Don’t dismiss a property because the price is too high. That number is only the asking price. Many real estate deals are made at prices below what the owner is asking. Regardless of the asking price, owners of properties that have been on the market for a while are likely to be receptive to a low offer.
Buying below market value is one way to make money, but a smart investor doesn’t discount a higher priced property if they feel they can turn around and make a profit of more than 10%. As an investor, you shouldn't’t shy away from a property that’s a mess or in need of maintenance. A few cosmetic improvements can significantly increase the salability of your investment.
Legal notices
Another way to obtain leads is through posted legal notices. Owners who have problem tenants they have to evict are often good candidates. Divorce records, filings from probate court, notices of abatement or code violations, etc. provide a wealth of information on property owners who may be interested in selling.
Friends & networking
Be sure to let people you know and those your meet that you are looking for property. In addition, investment clubs or even more formal property owner’s organization can be a good place to communicate your needs. In many states you can offer and pay a finder’s fee to someone who helps you find a property, even without a real estate license.
Turning down bargains
It isn’t a bargain if you can’t afford it. Evaluate potential investments carefully; considering repair, maintenance and holding costs. Avoid any purchase where you would have to get rid of the property quickly. There will always be other opportunities.
For investment purposes, property in the best location will offer the greatest liquidity (shortest sale time) and greatest opportunity for appreciation in a good market. The best location offers the least risk and will depreciate less, even though it will cost more initially. The old axiom is true: buy in the best location you can – even if it’s the worst property.
Stick to your own backyard
Become an expert in a particular area. You will begin to see patterns indicating the value of a specific kind of property in a specific area. Unless this is a strong reason for investing outside you geographical area, don’t.
Be very wary of property advertised outside its geographical area. In general, it’s either overpriced or has a hidden defect that’s kept it from selling in its local market.
Using real estate agents
The easiest way to find property is by using a local real estate professional. By having direct access to the MLS (Multiple Listings Service), they’ll know everything on the market in your price range. In addition, a knowledgeable agent or broker can supply valuable information about market conditions, prices and properties that may be coming to the sale. Also, make sure the agent you chose to work with is successful in the area and with the type of property you are interested in.
Why a third person can make a difference
When dealing through an agent, owners tend to be more objective and have a better negotiation than without an intermediary. Agents are used to working with sellers and can help you tailor your offer to overcome the seller’s objections.
Working without an agent
If you are interested in distressed properties (foreclosures, Sheriff's’s sales, tax sales, etc.), you may be better off without an agent. Agents tend to avoid these situations because there are no funds available for their commission. Distressed properties are often in debt in excess of the property value and would be a waste of time for an agent.
Owners who don’t use agents
In general, owners who try to sell their own property are doing so to avoid paying an agent commission. Often the owner does not have an accurate idea of the value of his property, so one of two things occurs. Either they will under price the property allowing a savvy investor to get a bargain, or, more likely, they will overprice the property based on the fact that it is the price at which they would sell – regardless of the market data. In addition, these are unscrupulous owners who appear unsophisticated, but are really trying to hide a defect. Be wary of dealing directly with owners.
Advertising leads
Begin a regular practice of searching the classified ads for property for sale or lease. Even if you are only interested in buying, a desperate-sounding owner seeking a tenant may be motivated to sell. Look for indications that a seller is under pressure to get rid of the property.
Finding the bargains
If you can buy a property for 20% less than it’s fair market value, then you’ve already made money just by buying it. Don’t dismiss a property because the price is too high. That number is only the asking price. Many real estate deals are made at prices below what the owner is asking. Regardless of the asking price, owners of properties that have been on the market for a while are likely to be receptive to a low offer.
Buying below market value is one way to make money, but a smart investor doesn’t discount a higher priced property if they feel they can turn around and make a profit of more than 10%. As an investor, you shouldn't’t shy away from a property that’s a mess or in need of maintenance. A few cosmetic improvements can significantly increase the salability of your investment.
Legal notices
Another way to obtain leads is through posted legal notices. Owners who have problem tenants they have to evict are often good candidates. Divorce records, filings from probate court, notices of abatement or code violations, etc. provide a wealth of information on property owners who may be interested in selling.
Friends & networking
Be sure to let people you know and those your meet that you are looking for property. In addition, investment clubs or even more formal property owner’s organization can be a good place to communicate your needs. In many states you can offer and pay a finder’s fee to someone who helps you find a property, even without a real estate license.
Turning down bargains
It isn’t a bargain if you can’t afford it. Evaluate potential investments carefully; considering repair, maintenance and holding costs. Avoid any purchase where you would have to get rid of the property quickly. There will always be other opportunities.
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