Real Estate investing is a brutal business. The stakes are high, they days are long and many find the business isn’t as glamorous as many make it out to be on network television. But for some serious investors high profits and a stable career await.

What differentiates the winners from the losers in Real Estate Investing? The simple answer is analytics. Like any business is all about the numbers. The old cliché that you make your money when you buy and get paid when you sell is all too true. Buying carefully is a common trait amongst all successful Real Estate investors.

Breaking down a purchase into three main steps can help isolate the stages in which many successful investors make great buys. The primary step is securing the funds, in Real Estate, you have to pay to play. Many investors – even highly successful ones use leverage money to make their buys. Leveraged money is borrowing other people’s money in addition to their own to make a purchase. Taking $100,000 and putting twenty-percent down on five $100,000 properties allows them to leverage their $100,000 five times.

Leveraged money comes with costs. You must begin thinking of your exit strategy and ask yourself, “How long do I anticipate holding this property.” The money you borrow is usually at a high interest rate and significantly eat up profits if your calculations are off. Additionally, money can be hard to come by – securing it advance will ensure you can act quickly on a great Real Estate investment.

The second primary prong of the decision making process, which was touched on earlier, is to determine your exit strategy. Do you intend to buy and hold, or do you intent on becoming a Real Estate Flipper? Both methods have great opportunities but will affect the way you finance and purchase a property.

For example, if your intention is to buy and hold, the prudent Real Estate investor would want to maximize rents (and monetize the property while they hold it). Knowing the average rents for an area is key and it’s also highly important to know local vacancy averages to determine your estimated rent collection. Many novice Real Estate investors will overlook many key expenses of owning a rental unit. Making a list of all potential maintenance issues for the next five years in addition to your taxes, insurance, legal and management fees. You may find that a deal isn’t so much of a deal when all the cards are on the table.

On the other hand, Flippers need to watch their bottom line. Television has glamorized Flipping. Flipping properties is not about buying an ugly home and filling it with expensive upgrades. Get into a property at a great price and enhance the value and marketability with specific, targeted upgrades to the home. Know your competition. If you are targeting a $150,000 price range find out what sets you apart from the competition. If you can’t find anything – you need to, or lower your price. Aim to be in the top 20% of condition and lowest 20% of price in the neighborhood.

Lastly, have a plan “B.” Every serious and consistent investor I know has a plan “B.” The old mantra, Try-Fail-Adjust is the right attitude. If your flip isn’t selling and you can’t afford to drop the price, consider the long or short term hold method and curb some of the expenses until you can sell the property, or consider other more creative financing options. Non-traditional Real Estate deals are happening more than ever, trading cars, notes, and lease options are commonplace in today’s rapidly changing Real Estate Market.
Key points to consider when investing: Do your home work, plan your exit, and have a plan “B.” Real Estate is a great career and with a little diligence, can be wildly successful for anyone willing to invest in Real Estate.

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Buying homes for sale at the foreclosure auction may seem glamorous to some, but without proper preparation you may end up with an expensive life lesson.  With a few simple measures one can properly harvest profitable properties time and time again minimizing risk and maximizing profitability.

The first measure, and the absolute most important, is to thoroughly research the foreclosure auction process in your area.  Specifically the trustees sale auction dealing with bank foreclosed properties.  In my area, our trustees’ sales are held at the courthouse on Friday Mornings.  Each state has different rights for the homeowner, bank and potential auction purchaser, start with a web search and research your area.  It would be strongly advisable to spend an hour discussing with a knowledgeable local Real Estate Attorney or Realtor.

Once you are up to speed on your local Foreclosure Auction procedures and rules you need to begin attending your local auction as frequently as possible and tracking auction properties.  You do not want your first time at the auction to be the same day you make your first purchase.  You can obtain lists of properties in foreclosure from your local Realtor or through your local title company.  A Realtor will be a great asset in providing comparable sales analysis and resale projections for your purchases.

Depending on your area, the information you receive may be sixty to ninety days in advance of the sale.  To obtain more current auction data, research homes for sale on the trustee’s website, the trustee is usually listed on the foreclosure sale data you receive from your Realtor or Title company.  A simple web search for the trustee name will yield their website, most sites are easy to navigate and you can easily drill down to your location and see homes for sale and often times, the opening bid of the auction.  Pick a list of properties you want to watch, have your Realtor partner pull comparable sales and make a quick drive by of the properties.  It’s important to note that most foreclosure auction processes do not allow interior inspection of the property and they are usually sold as-is.

In addition to comparable sales, there are some legal considerations to investigate when purchasing auction properties.  This is where an experienced attorney or Realtor can come in handy to help minimize risk.  There are some services which will provide all the data for you, but typically cost up to three percent of the purchase price for the data.  A few important factors to consider:

You Must (absolute Must) purchase the primary lien on the property.
If you purchase a subordinate lien, such as a second mortgage, you risk the primary mortgage foreclosing and eliminating your position in the sale.  Do your title research on this if you mess up here, you can kiss a lot of money goodbye in short order.  Most subordinate liens will be removed after the purchase (here is a good topic of discussion with your Real Estate Attorney).

You Must research IRS liens.
Depending on when the lien was filed this can be a problem.  It’s important to allocate time to research this.  It’s different in each area and a good title company can help.

Some like to preview the properties at auction, I know I said that you typically cannot preview them, but in rare cases they are listed by a Realtor up until the auction.  Have your Realtor partner schedule an appointment and take good notes, you may have an advantage over other bidders by knowing this “inside information.”

If you don’t  have funding lined up, do it now.  Most auctions are cash sales.  They want paid when you win the auction.  Some auctions will require a holding fee anywhere from $1,000 to $5,000 or more.  Get your money together and have it ready.  In most cases, auction purchases must be done with hard money (through an investor usually at high interest rates, this must be factored into your budget).

While you’re doing your research, make time to attend your local auction. Track what properties are for sale and what they sell for, also track the properties that do not sell.  Start keeping a simple database of properties.  Most experienced I investors will suggest watching a minimum of ten auctions prior to attempting your first purchase.  After attending several auctions, you’ll begin to see some familiar faces.  Watch their methods, track their properties, what they purchase and what they sell for and begin developing your plan.

With several auctions under your belt, money in hand and more research than you think you need, you can step up and make your purchase at the action.  Once you’ve made your purchase a number of things may happen.  Most areas will have you fill out the deed on the spot, others will have a small mail in process.  If the home you purchased was occupied the former owner retains some rights and may have twenty days or more to get out of the home.  You may have to evict them.  I suggest using a Real Estate attorney for this process, as an incorrect step may result in the former owner living in your home longer than expected and free of charge.

This is not intended to be an all inclusive tutorial on auction purchases, but a compass to point you in the right direction.  Auction purchases require lots of hard work and research, if any point were to come across we’d like it to be that one.  Get out there, start tracking auctions and start investing in Real Estate, it’s a great time to make great money if you track the details and make one of the great buys that are out there!

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If you are planning to add more rooms to your home, there are a range of ideas and plans. By following some simple steps, one can not only reduce the overall cost, but it will prove wildly successful in increasing the value of your home. In most areas, adding square footage can significantly increase a home’s value if done correctly.

Many are not familiar with the different methods of construction, permitting process or even where to start. For most, adding on to their home is a daunting task, and should begin with professional advice. Like every project, clearly outlining objectives and goals is the surest way to achieve success.

One should ask themselves, “What do I want to achieve with this addition.” Maybe your family is growing, maybe you’ll be working from home and need an office, or perhaps a dependant relative may be moving in. Some may just want to add square footage to increase their homes value. Whichever scenario best fits you, it is important to do an analysis on the property to estimate the return you may have on your investment.

Once you know the scope of your investment, you must next plan your addition. Many will choose an architect to draft the additions, others will scratch out their ideas on paper themselves. I prefer using an architect as they have the experience to properly estimate materials used, proper engineering, and will ultimately result in more streamlined addition.

Arguably, one can hire the architect prior to measuring their potential return on investment, but I prefer to know my options prior to engaging an architect to avoid costly revisions. Knowing whether your return is maximized with the addition of one bedroom or three is best known before you have the plans drafted.

With the plans in hand you should begin interviewing professionals. Check with your local government on licensing and bonding requirements in your area. It’s imperative to have a licensed, bonded and insured contractors on your job site. Without proper documentation and insurance, a simple fall on your property could result in costly lawsuits that the home owner may be liable for.

Get references from all your contractors and call them. Ask them about the scope of the project they hired, the cleanliness of the job site, and the quality of the workmanship. You cannot be too careful. Your local Better Business Bureau may be of assistance too.

Lastly, do not be afraid to negotiate. There’s almost always room. Compare the bids carefully, I’ve found that the contractor who spends the most time measuring and developing an accurate estimate is usually right for the job. Be leery of contractors who walk into a room and shout out a price without unclasping his or her tape measure from their belt.

Once you’ve selected a contractor, get the deal in writing. I cannot stress this enough. Clearly outline payment milestones and insist on lien releases from suppliers prior to making any payment. In some states a supplier can lien the “project house” if the contractor fails to pay them for materials. It’s imperative to hold your contractor accountable.

If taken seriously the remodel and addition process can be highly rewarding and very enjoyable. Working methodically through the process is the sure-fire way to guarantee your success. Once finished you can enjoy your new addition knowing you made the right decisions and protected your most valuable investment: your home.

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