Profile picture for NJDESI

I am new in real estate investing. How does one pick a money making property. What 2 look 4.Thanks

What are the basic things I should look at when investing in real estate.  Obviously the goal is to make extra cash.  From my perspective I would like to flip the property immediately.  I am being too naive.
  • December 17 2009 - East Brunswick
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Answers (19)

Nope, you're not being niave at all, it was a good question. When flipping properties, I'm assuming youre buying fixer uppers? When renovating properties, do not go high end. Our market is mostly first time buyers using FHA loans. First time buyers are grateful to be buying a home so high-end appliances, etc are not a plus when flipping. You will not re-coup your investment dollar for dollar when going high end. Keep your renovation mid-garde. You are shinning the penny!!!!
  • June 19 2010
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John  your formula is missing:
1. maintenance expense (minimum a couple hundred a month. though years may go by when it is lower, eventually home will need a new roof or AC)
2. vacancy (at least one month a year on average)
3. advertising
4. management/ Realtor fees.
  • June 19 2010
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Here's a formula I use:

annual net operating income (NOI)/ down payment = percentage return

I know, what is "annual net operating income"? This is basically, income minus expenses or in other words, cash flow.  Let's look at an example to see how it all breaks down.

Subject home: $160,000
Required down payment: $40,000
Amount Financed: $120,000
Rate 5.625%

Income:  1,550
Mortgage:   690
Property tax:     83
Insurance: 52

Add this all up and you have a monthly NOI of $725 or annual of $8,700.  Getting back to our formula (NOI / down payment), it would look like this:

$8,700 NOI / $40,000 DP = 21.75% return

Hope this helps

JM

  • June 19 2010
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ROI = Return on investment & DSR= Debt service ratio. Speak with real estate professional that specializes in investor owned properties and/or if you don't have one yet, retain a CPA or financial advisor. You'll receive valuable guidance. .... Happy funding, Rudi
  • June 07 2010
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If you are serious about making money in this market especially with a flip.  You should first align yourself with a professional Real Estate advisor.  A seasoned agent in your area.  This will allow you to draw off their knowledge to help you in your endeavors.  You can usually ask them stories of their past experiences to show you which steps to take and which ones to skip.  Now is a very challenging market because their is so much competition among investors for fairly priced properties.  This coupled along with the limited number of buyers in the market makes this market extremely difficult for flippers.  Also consider options such as leasing in the event your first flip is not as successful as you might hope.
  • June 07 2010
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No, you are not being too naive. Flips can still be done in todays market. Mr. Bonas is correct, you can't make hundreds of thousands of dollars off of one deal. If work needs to be done you are going to have to either do the work yourself(not recommended) or hire contractors(which is a pain in its self). You can easily spend your self into oblivion after you get emotionally attached to the property and make changes that are not needed and that you think is adding value to the house when in reality it is not.
In today's market you have to be extra picky on the house that you buying. I am working on a flip right now, that is how i know they can still be done. Mr. McCoy just doesn't know where to look. so contact me with any questions. I work with investors on all levels of experience.
  • June 07 2010
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Profile picture for EdwardsjdlkNevaeh
Most do not make money on their first deal. Join a not for profit real estate group and find a mentor who has nothing to sell you. Great back up plan is to only try to flip properties that make great rentals just in case you get stuck with it.
  • April 28 2010
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Profile picture for R. E. Investor
This is the dream of most all new R.E. investors. Most do not make money on their first deal. Join a not for profit real estate group and find a mentor who has nothing to sell you. Great back up plan is to only try to flip properties that make great rentals just in case you get stuck with it. Good Luck!
  • April 28 2010
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The basic things to consider as a new investor is to figure out what your ultimate goals are.  If you're interested in quick flips there is money to be made if you can get the property for an extreme steal and have the resources on hand to fix it up quick and turn it over for a price that is still under the market value. You still can profit if you're willing to accept a lower profit margin.

If you're interested in buying and holding, definately do you're home work. As a landlord myself I know it isn't always easy and it's not for everyone. Investment wise,buy low and find a multi-Family situation where 1 rent will cover the entire mortgage. This way if you lose or have to evict a tenant, you won't go into panic mode. Good luck either way...
  • March 22 2010
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No ,  there are still properties to flip. I have worked with a few buyers doing that. It is not easy. It takes the knowlege of the market.And the ability to get ALL WORK needed done and then put it on market. For example- you find a home for $100,000 in a market of $200,000 homes In this downward market that area is losing value at 1% per month.If it takes 1 year to flip the home , that areas value is now $24,000 less. This reduces the margin on the flip nearly 25%. The key to a flip in a doward market is timly completion of construction and agressive pricing . You can only make money if some one buys it. Homes are selling. Just at lower prices
  • March 22 2010
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Profile picture for Mark LeMenager
I love to see new investors enter the real estate market.  Market go up and down, but real estate remains one of the few ways in which ordinary people can build a serious nest egg.  Some of the other advice here is pretty good, so I won't repeat it.  Study, study, study is what beginners need to do.  Are there flipping opportunites out there today, you bet, I've seen several flips sell recently.  Keep in mind they were not for huge money, but if you've got some cash, it's pretty easy to turn $100,000 into $125,000 in just a couple months.

Good luck to you,
Mark LeMenager
InvestInCentralFlorida
  • December 26 2009
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Profile picture for CSG Anthony
Join your local Real Estate Investment club (njreclub, gsreia, etc...). You can just go to one of their monthly meetings and network with other investors and agents. Most of them are willing to talk and help out. They can give you a good amount of information on how to go about it as a beginner. Also, search the internet as there are plenty of websites that offer a great deal of info.

You will be discouraged at times, but hang in there. There are many people who don't and refuse to understand the investing side of the business and will tell you that you can't do this or that. There are plenty of deals to be had in this market.

Good Luck!
  • December 22 2009
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Look. You don't know anything about real estate investing, right? (Uh, right.)

You know that everybody and their mother is looking to make extra cash, right? (Yeah?)

You know the real estate market is slooooow, and that just because you manage to buy something doesn't mean you'll be able to sell it anytime soon, right? (Good point!)

So. You are being too naive. If there were flips to be had, there's a good chance that we'd be flippin' them!
  • December 19 2009
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Profile picture for Beauchpe
This is not a great market for buy and flips unless you have some real experience. Better to become a landlord and find a property with some cash flow

see Investing in Rental Property
  • December 19 2009
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You must ask yourself what your investment goals are.  Are you looking to flip for "quick" cash, or are you looking to buy and hold income-producing property for wealth creation?

I would encourage you to read the free report "Building Wealth in Real Estate".  This will help you answer the question of what to look for.

  • December 17 2009
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ok are you unlicensed investor?

I would contact a realestate professional that had worked in flips. and know your market very well most agents will find the properties that will be income generating etc for you. and then help you flip and sell it a a discounted rate for your future buisness. best of luck
  • December 17 2009
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Lol, you are aware that property flipping is partially to blame for the mess we are in because it was taken as get rich quick. Everyone believed if you bought a property painted and changed the carpet you could sell it for $80k more than you paid for it.

with that said flipping properties has really died down because the values are dropping as opposed to artificially appreciating. If you buy a foreclosed property for $250,000 and put $30,000 worth of work to bring it up to date you would be lucky if you could even list it $300,000 (as opposed to the $400k of years past) after fees and commission you would be even luckier to walk away with $3,000 which will then be taxed.

 (look at how few TV show about flips are now being broadcast)

I have seen quite a few properties go up as "flips" in this current market and feel that the agents should explain that in this locale a flip would not be a wise "investment". As most of those speculative flips in this market end up right back on the market break even or at a loss to the seller.

* I am not stating that real estate investing is done and over but, it now requires more realistic thoughts, and actions, as it is investing and not get rich quick *
  • December 17 2009
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Yes, you are being too naive.
  • December 17 2009
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Profile picture for Blue in d Nile
What you look for is an investor with no experience that wants to flip houses immediately, because they will over pay, not be capable of doing the repairs, not have set aside enough resources, and thus be forced to sell at a substantial loss.

Or, more seriously, you look for an area where the bottom tier was about $600k a decade ago, but bubbled at about $3.5 million, and is now selling at less than $115k for the "median" of the bottom tier.  But you also want to make sure there are jobs in the area, that there is transportation and energy and water in the area, and the taxes aren't outrageous, and you want to make sure the property is in reasonably good condition so that you can rent it out for at least 20% more than your total expenses, until such time as the market stabilizes.

If the property is presently being sold substantially below present market value, it is already sold.  Investors buy what no-one wants now knowing the intrinsic value, and what people will want later.
  • December 17 2009
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