Are you an investor or a trader?
Disclosure: We are sharing our experiences and knowledge with you. Please do your own due diligence before utilizing anything here. This is not to be construed as investment advice. You should seek competent council before trying this at home.
Trader or Investor? When ever I elevate a real estate deal. The first question I ask myself is this a trade or an investment?
- Are you a buy and hold investor? (Landlord)
- Are you a wholesaler? (Assign Contracts)
- Rehab and resale? (Flipping Property)
If you are investing the first thing to decide is how much capital are you employing?
- Be realistic with yourself.
- This defines the price points you will work with.
- Real Estate Investing allows large degrees of diversification. Smart money does not put their eggs in one basket.
- Real World example. Most of the funds we have worked with will not allow more than 10 percent of the fund to be invested into one single property.
Buy & Hold:
- You need to understand price versus value in Real Estate. As the price goes up, the value goes down.
- Return on ROI is key; realistic rental rates, insurance costs, management fees, property taxes, maintenance/repairs, vacancy rate etc.
- Refer to APOD for cost analysis/ROI.
- Know the area you are investing in i.e. up coming zoning changes, utilities, crime rate, etc.
Side Note: ROI comes in all shapes and forms. In all types of assets.
If bought for $35,000 and rented for $595 a month. This yields 12.78% yearly cash on cash return.See last cycle price performance. (this asset 3 years later is now rented for $750 a month)
Below is this assets price performance in the last cycle.
Now lets talk about trading Real Estate:
- The purpose of this is to clarify the difference between trading and investing in Real Estate.
- There is nothing wrong with trading Real Estate. We have all done it and still continue to do it but it is important to understand the inherent differences of the two.
Wholesaler: (Note, you need to understand unlicensed activity if you intend to do this. We had 2 great meetings about this topic. Click here for that information)
- The most effective wholesalers sell property to investors with an adequate equity spread.
- 5% below market value is not a “deal”.
- Disclose, disclose, disclose!
- Example of a good deal is 65% of real market value and an assignment of 75% of real market value.
- Be sure to have an attorney review/revise your contracts.
- Disclose in the contract if you are a licensed Real Estate agent.
- Have comparables to help support real market value.
- Ensure you are using legal contracts and marketing materials. You need to be mindful of both contractual law and FL Statute 475.
Rehab & Resale:
- Need to be well funded to flip property when doing full rehabs.
- Be thorough when estimating rehab costs. In recent transactions, we’ve had licensed contractors do the estimating. They toured the assets with us. Their estimates were part of the underwriting.
- Understand the market you are flipping into.
- Rehab the property to comparable market. standards or better than comparable properties.
- Understand your exit and resell price point. There are certain points that the banks are resistant to lend in.
- In investor driven markets, investors make the most sense for your exit strategy. Then you must underwrite with the APOD.
The SWFL REIA is the premier source for Real Estate Investing education and networking.
The SWFL REIA is different in the Real Estate Investing world in that we do not do information product sales. Our content rich meetings focus on Real Estate Investing via collaboration with like-minded Real Estate Investors sharing their own experiences.
The SWFL REIA is on the cutting edge of data gathering and analysis of the housing market and foreclosures. Our Analysis and Trend reporting has made the SWFL REIA an expert source for the media and set standards by which the housing market is analyzed and trended within the industry.
Our members are Real Estate Investors, Real Estate Agents, Title Agents, Insurance Agents, Landlords, Property Managers, Wholesalers, Rehabbers, Note Buyers, Hedge Fund Managers, Bulk Asset Purchasers, Foreclosure and Probate Investors. Come and network!
Our Motto: Knowledge withheld is Knowledge wasted.
The number one key to being successful in real estate investing is?
To understand what you are there to do!
From our experience, this is the most critical phase. If you have a clear plan it is easier to deploy capital while still operating within a margin of safety.
The SWFL REIA is the premier place to understand what you are here to do, in relation to real estate investing! We look forward to meeting you at a meeting soon!