Posted by: Alan Brown in Remodel, Rehab Money, Rehab, Real Estate, Property Ownership, Private Lender, Marketing, Investment, investing, Inspection, Homes on the Market, Getting Started, Foreclosure, Flipping, Equity, Due Dilligence, Comps, Buying Homes, Bank Owned, Appreciation, 1031 Exchange on
Mar 14, 2010
As a general rule our investing business focuses on buying distressed real estate properties, rehabing them and renting them to good long term tenants. Over the past year we've been able to generate on average a 20% annual return for each single family house we've purchased using this model.
From time to time we need to generate capital to finance new acquisitions. Flipping retail homes is one way to raise relatively quick capital albeit it can take up to 6 months to get cashed out. Flipping is generally frowned upon by sophisticated investors and I for one generally agree. But there are times when waiting 5 to 10 years before cashing out of a rental property is just too long to wait to unlock your equity in an investment.
We found a good deal on a 4 bedroom 2.5 bath 2800 sq ft home in a strategic area of Michigan for about $57,000. We intend on investing another $35,000 into repairs and improvements. Comparable homes in the area are selling between $130,000 to $150,000 in under 6 months. This would give a net profit of between $38,000 to $58,000 before closing costs are factored in.
A smart way to purchase property without regrets after the sale consummates, is to put safe guards in your sales contract that give you a safety net. One of these nets is to always make any offer subject to a SATISFACORY property inspection. Now, whether you can perform this yourself or hire a professional, you still have a legal way of voiding the contract to purchase if something should be revealed that could cause potential financial risk down the road for you. Finding such an inspector is not a hard task and word of mouth within the real estate community is usually the best route. But you can also locate potential inspectors on the internet as all should be licensed with their state.
You are looking for hidden or masked areas of structural, electrical and plumbing problems that the owner is purposely or inadvertently not disclosing that could be major issues down the road for you. If you feel you possess adequate expertise to perform your own inspection, be sure to pay close attention to the following list of possible trouble areas:
Another area of concern that most home buyers take for granted, is past land use that could have caused residual soil contamination. Such as, if a gas station or industrial business that typically used gas or cleaning solvents in the past or the property was used as a dumping ground for hazardous/toxic wastes of some kind.
