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Showing posts with label mao. Show all posts
Showing posts with label mao. Show all posts

Sunday, June 2, 2013

Do Your Due Diligence before Purchasing

You think you found the property you are going to make some money on but once you close on a property, responsibility for this asset becomes all yours, good and bad. In order to be a successful real estate investor you need to make sure you don't make any mistakes. If you do, it will be small one and easily forgotten when you cash your first check.

Below is a list of items you should be checking before you make an offer.

Due Diligence on Your First Deal

Duplex Kitchen before rehab in Wynwood Miami
Wynwood Duplex Kitchen before Rehab
  • Inspection
    • Upon Entering the property look for visual clues that indicate the current condition of the house.
    • Look for things that should be there but are not.
      • A bedroom without a closest. HUD would not consider this a bedroom.
    • Look for things that are there but shouldn't be.
      • A window inside the house that isn't an exterior window. Could be a porch that was closed in years ago.
    • Looks for points of failure
      • Connections: bathroom fixtures, underneath sinks....
      • Intersections: roof, ceilings and walls, walls and windows, floors and walls, water stains...
      • Windows and Doors: water leaks, holes, broken or cracked pains of glass, widows and doors open and close properly...
    • Black Mold - Indication of moisture buildup.
    • Termites - Big problems for us in Florida and Puerto Rico.
    • Asbestos - Probably present in older homes. Need to check for this.
    • Environmental Hazards - Underground oil tanks for heating, septic systems. Check the property history.
  • Comparables or Appraisal - Before purchasing the property see if you can get your hands on:
    • Recent property appraisal less than 90 days old. Ask the seller if he/she has a copy. Dania Beach Duplex rehab, number 36
      Dania Beach Duplex Rehab
    • Try to determine the After Repair Value ARV by getting three property comparables within a 1 mile radius and less than 90 days old.
    • Use the Maximum Allowable Offer MAO Calculation to help determine your purchase price.
  • Title Search - Make sure you use a Title Company that understands how investors think and work. Every Real Estate Investment Club can recommend one. You assume Tile companies know what they are doing but I have gotten burned many times due to Title Company mistakes. Make sure they check for:
    • Open Permits - This has caused us more problems when we go to SELL an asset in our portfolio. It is usually the BUYERS Title company that finds the mistake and causes delays with the closing. MAKE sure they check for Open Permits!
    • Liens and Violations - Make sure they check for pet violations (Pit Bull), water, city and county liens. Check:
      • The City where the property is located: City of Miami, etc.
      • The County: Dade, Broward, etc.
  • Taxes - Check to see if back taxes are owed. Usually the Seller pays the back taxes but it is good to know while you are negotiating terms and price before you make an offer.
    • Most tax records will indicate if the structure is legal or not.
      • If you see on the tax rolls the structure is listed as a 2 bedrooms and 1 bathroom and on the MLS it is listed as a 3 bedrooms and 2 bathrooms there maybe a problem with the investment property as being legal or not.
  • History - Most counties will have a history of the property since it was built. It will contain information about the property that can be used to determine what has been done legally with permits, liens, violations, former owners, etc.
  • Zoning - You must know the current zoning for the individual parcel of land and its existing structure. You need to know what is the permitted use and current usage. Knowing this information can help you with your rehabbing plans and exit strategy.
  • Survey - You may want to order a survey before purchasing to see if the investment property has any encroachment issues.

These are some of the items we look at before making any decision to BUY. As you gain experience a lot of these items will become second nature and you will be able to apply this knowledge to tweak your success as a real estate investor.

Do you have any tactics you apply before you purchase a property? We would love to hear from you. Write your comments in the comment field below.

Related Links, Tips, Blog Postings, Presentations or Articles:

Written by +Bob Burns.
 
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Bob Burns at Bahama Beach Club Ft. MyersBringing It to the Beach Baby!
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Friday, June 1, 2012

FREE COMP Tool for Real Estate Investors.

Comparable or COMP

Real Estate Investors need property comparables or COMPS to determine the after repair value ARV of an investment property. The ARV number will be used to calculate Maximum Allowable Offer MAO.

Real Estate Agents have a nice tool for getting COMPS or Comparables for properties because they have access to the Multiple Listing Service MLS. Investors need to find comparables using other resources.

FREE COMP Tools

Luckily, the internet has provided FREE COMP Tools for Real Estate Investors. Below are several services that can help investors determine property comparables:

FREE COMP Tool from Miami-Dade County, Florida

I found a "FREE" comparable or COMP tool provided by Miami-Dade County, Florida. It provides all the closed sales recorded by the county within a specified area, time period and radius. It isn't very dynamic but it gives you an idea of what is happening in a particular neighborhood you are thinking of investing in.

The video below specifies how to use the particular tools discussed in this posting. See below:

If you want to access the Miami-Dade's Real Estate Comparables go to: Miami Dade County Closed Sales Database.

Remember! Look for the link "My Neighborhood".

Related Links, Blog Postings, Presentations or Articles:

Written by Bob Burns.
 
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Bob Burns and air filter maskCOMPS Baby, COMPS!
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Real Estate Investor
about.me/RobertKBurns
Telephone #: 305-586-5280
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Monday, March 26, 2012

Real Estate Investors need to use an Action Plan.

There is a saying among Real Estate Investor's - "You Make Your Money when You Purchase the Property not When you Sell It."

There are so many things that can go wrong so it is important to make sure you buy the property right.

Smart Real Estate Investors need to develop an Action Plan before they are going to purchase an investment property. This plan should include the following:

  • Identify a possible property for investment.
    • Make sure your SELLER is MOTIVATED to do the deal.
  • Perform a market analysis.
    • What are going to be your carrying costs for the next 90 Days. Principal, Interest, Insurance, Taxes, Utilities, HOA fees....
    • After Repair Value ARV - What is the property worth after repairs. Look at the COMPS! Yes, the comparables.
    • Calculate your repair costs.
    • Calculate your Fair Market Rent FMR. See if the property is going to cash flow.
  • Secure Your funding for:
    • Purchasing the Asset.
    • Carrying Costs.
    • Repairs.
  • Note: Don't forget to pay yourself for all this work you are doing!
  • Make an OFFER based on the Maximum Allowable Offer MAO Rule, using ARV, Carrying and Repair Costs.
  • What are you going to do with the asset? Develop an EXIT Strategy:
    • Flip the property for a profit or
    • Hold the property for Cash Flow.

This is the basic action plan which needs to be very fluid. Things change and you need to adapt.

Turnkey Property!

One of the more successful Action Plans we have used is to bundle a Section 8 or Plan Ocho tenant within the property FOR SALE. The tenant is part of the BUYER's Turnkey Package.

TURNKEY means the BUYER simply needs to turn the key to the front door and start making MONEY.

All the hard work has been done for the BUYER:

  • Buying a Property that will Cash Flow.
  • Rehabbing the property and brought up to Code.
  • All utilities are functioning.
  • Finding a reliable tenant.
  • Asset Protection strategy is already in place.
  • Selling the Investment Property with minimal Closing Costs.
  • Optional: Have it already furnished.

Investors should provide a turnkey solution for all their properties they plan to sell in the near future.

BUYERS like the idea of purchasing a property that comes bundled with a tenant.

Action Plans allow for Immediate Cash Flow and no Headaches!

Written by Bob Burns.
 
####
 
The caricature of Bob BurnsMoney in The Bank Baby!
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Real Estate Investor
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Telephone #: 305-586-5280
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Tuesday, February 21, 2012

Determining Your Investment Property Value

A good Real Estate Investor is constantly looking for motivated sellers that are offering deals they can make a substantial profit on. Investors have to determine what they are willing to pay for this asset without losing money in the process. There are several problems that can occur with this investment objective :

  • Finding Motivated Sellers. In order to make a substantial profit, investors must offer a purchase price substantially lower than the Seller is willing to accept. If the Seller doesn't negotiate with you on price or terms you are wasting your time. Move On!
  • Determining the Maximum Allowable Offer MAO. This formula allows real estate investors to determine the MAXIMUM price they can offer the seller and still make a profit.
  • Determining the Property's Repairs Costs. Sellers are usually motivated to sell their property because the asset or themselves are in a state of distress. As investors purchase multiple properties they get pretty good at determining the cost to bring the property back online.
  • What is the After Repair Value APR? What will be the property's value be after cleanup and repairs are done? You need comparables to assess the property's value. The Multiple Listing Service MLS is a fantastic source for retrieving sale and property information but:
    • MLS is only available to Realtor Associations.
    • You have to be a Realtor Association Member.
    • Costs money to be a member:
      • Realtor License Fee.
      • Association Membership Fees.
      • Continuing Education Fees.

What if you don't have access to the MLS to determine property comparables or COMPS? How are you going to determine a property's value if you don't have access to information about the neighborhood?

Don't Worry!

There is plenty of information on the internet. Most counties in the United States provide free data concerning all the properties they currently have on their tax rolls. We provide a page on our web site that lists Property Information and Clerk of the Court data for each of Florida's counties.

Once you have determined the following items:

  • Repair Costs.
  • If you are financing the deal, Principle and Interest or P&I and closing costs.
  • Monthly Fees like:
    • Electricity and Water Access.
    • Insurance.
    • Taxes.
  • Determine the After Repair Value APR.
you will need to plug in these numbers into the MAO formula to determine your MAXIMUM Offer Price.

YOU MUST never, never, never, ever go beyond that price or you will lose money and the MAO price is only good for 90 days! It is based on a three month window.

Related Links, Blog Postings, Presentations or Articles:

  • In the very near future we will provided a short video below this blog posting that will help determine a property's After Repair Value APR in Miami-Dade County, Florida.

Written by +Bob Burns.
 
####
 
The caricature of Bob BurnsNever Quit!
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Real Estate Investor
about.me/RobertKBurns
Telephone #: 305-586-5280
email: sec8@planocho.com
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Monday, January 23, 2012

Do You need FUNDING to be a Real Estate Investor?

Eventually a Real Estate Investor will hear about a deal that is too good to pass up but their CASH is all tied up in another deal. There are no funds to purchase or repair! Time to borrow money!

But before the phone call is made, Investors need to:

 

 

  • Act Quickly before the deal is sold to another investor.
  • Ask questions about:
    • Will the owner accept "No Money Down?" If not, what is the minimum down payment?
    • Can the down payment be something other than cash?
    • Will the owner hold paper? If so, up to what percentage?
    • What are the monthly carrying charges? (Insurance, utilities...)
  • Determine the properties Maximum Allowable Offer MAO so you can make an offer that is going to make you money quickly.
  • Make sure you have multiple exit strategies.
Once you feel comfortable about the terms of the deal, time to dial your Lender's number! Good Real Estate Investors always have funds available 24/7 to take advantage of transactions that magically appear.

Lenders are adverse to risk so here are some questions you should ask the funding entity:

  • What states are they licensed to lend money?
  • Will they fund the deal based on the After Repair Value ARV (good) or the contracted price on the Purchase Agreement (bad)?
  • Will they fund the repair costs?
  • Is there a Prepayment Penalty?
  • How long can the investor borrow the money for?
  • Up to what percentage will they fund? If your contracted price is $150K and they will only fund 70% what is the total amount that they will lend? Answer:$105K. That means you have to come up with $45K. OUCH!
  • If needed, can the investor get more time?
  • What are the repayment terms? Are these terms negotiable?
  • Are there any Closing Costs, Points, Etc.?
  • What are the Minimum and Maximum amounts I can borrow?
  • Are there funds available 24/7 to take advantage of NEW investment opportunities?
Every real estate transaction is unique so there are different type of loans you can use for each deal depending on the parameters. Here are a few names you have probably heard of:
  • Conventional
  • Hard Money (Quick but expensive)
  • Private Money Lender (Best Option)
  • Transactional Funding (Good for Short Sales)
These all serve a purpose and have advantages and disadvantages for real estate investors.

Here is a list of lenders that you can work with. Web Links are below:

Bridge Loan for Multifamily Properties

Bedford Lending Introduces 7% Interest Rate Bridge Loan
For Distressed Apartment Investors

Hard Money Lenders

Brookview Financial

Capital Funding

Financial Help Services

Hard Money Today

Hard Money Lenders Directory

Onward Financial

PeachStone Capital

Rehab Funding

Wooden Nickel Funding

Florida Hard Money Lender

Private Money Lenders

Alan Cowgill Private Money Webinar 1st slide image

View Alan Cowgill's Private Money Webinar - Raise all the PRIVATE money you need for your Real Estate Transactions.

Mr Private Money

Trajan Financial CORP.

Transactional Funding (Good for Short Sales)

iV Transactional Funding

One Day Funding

Related Links, Blog Postings, Presentations or Articles:

Written by +Bob Burns.
 
####
 
The caricature of Bob BurnsI Love Fort Myers Beach!
Bob Burns Print Signature Photo
Real Estate Investor
about.me/RobertKBurns
Telephone #: 305-586-5280
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Sunday, August 21, 2011

Top 10 Real Estate tips and tricks
from Southern Florida

I was a young teen when my father started buying investment real estate in Southern New Jersey (Sea Isle, Avalon and Stone Harbor, Cape May County, New Jersey). He was a man that could do everything himself so being a real estate investor seemed like a good option for me since I knew a little about it. Boy was I WRONG! It is very difficult and frustrating but rewarding. I could give details but that is for another time.

While buying, rehabbing, landlording and selling in Southern Florida, I learned several tips, tricks and lessons that helped me during the investment cycle. These items will help you avoid mistakes, save time and money and make the process a little easier to manage.

To Your Success as an Investor, Rehabber and Landlord:

  1. Make sure you have the mail forwarded to your business address after you purchase a new investment property....Why? Read my previous blog about this one at: Make sure you have the mail forwarded blog...
  2. Check to see if you have any liens or violations caused by your tenant before giving back their security deposit. I got nailed for $500 for a pit bull violation (future blog posting).
  3. Make sure during a title search that your title company checks for Open Permits. More than once this has hampered a pending sale.
  4. Make sure when a potential client places a deposit for a rental property, you make them sign a document that explains the rules of the deposit, refund or non-refund terms, what it represents, disclosures, etc. Several times I received calls from potential clients wanting their deposits back after you, the landlord, already took your property off the market. Protect Yourself.
  5. You make or lose money on an investment property when you gain control of the property at a specified price. Make sure you follow the Maximum Allowable Offer MAO rule! See my MAO blog about this....
  6. When purchasing an investment property, make sure the tax records match the property description on the MLS. If the property is listed as a 3/2 but tax records say a 2/1, there may be a problem with the structure being legal.
  7. By checking the number of water meters and electrical meters will help you tell whether the multiunit structure is a legal structure.
  8. Make sure when you are about to sign any real estate contract for a property: Florida FAR BAR, short sale option contract, purchase contract etc., all parties are there for signature. If the significant other is not present you may have problems later on. By Florida law if the couple is divorced, unless the property has been settled previously (request documentation as proof), both husband and wife are entitled to the property therefore you need both signatures. Your first Question for any deal is "Are You or Have Been married?"
  9. While rehabbing a property, make sure your mailing address is posted somewhere that the mailman can read it. Otherwise, he will not deliver your mail or make sure you have the mail forwarded.(See number 1)
  10. Land Lords have more than one option for collecting rent and utility payments from their tenants. Section 8, Section Eight, Plan 8 or Plan Ocho is a government subsidized program that pays the monthly fees for low income families associated with living in the Land Lord's apartment, condo or single family home. For more information go to: Section 8 - Information for Landlords and Tenants.

Do you have any tips or tricks with the buying, selling, rehabbing or landlording that you would like to share?

Related Links, Blog Postings, Presentations or Articles:

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Written by +Bob Burns.
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