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Real Estate Investing: Are you Ready to Begin?
Investing in real estate can be a scary process for new investors. There are so many questions and concerns that run through a new investors mind. One of the biggest hold ups a new investor can make is to over analyze a potential opportunity, waste valuable time, and lose out on a deal.
Doing your research is an important step in the investing process, but don’t let that be the only thing you do as an investor. Start your real estate investing career sooner than later. Doing your homework is important, but money won’t be made until you start to invest. Here are a few suggestions on how to get started.
Find your property
Search the Internet daily and familiarize yourself with your local real estate market. Keep a list of potential investment properties. Sub-categorize it into a list of “current deals” and “properties to watch”.
Next, drive by investment homes that are of interest to you. If it is a potential investment opportunity, make arrangements to view the interior, whether it be at an open house or through a local real estate agent.
Choose an agent
It’s always a good idea to use an agent that has knowledge of real estate investing. They can run comparables and advise you on whether or not the property is good deal. Better yet, see if you can find a local real estate agent that works closely with a licensed contractor who will provide a ball park estimate on the renovation costs.
Not only am I a Sarasota Lakewood Ranch real estate agent, but my husband and I are investors of real estate as well. In addition, my husband is a local builder (Brista Homes, Inc) and licensed contractor, so my clients have the benefit of viewing properties and receiving renovation estimates quickly, enabling them to make a decision on a property before it’s gone.
Your local real estate agent can set you up to receive email alerts for properties on your “watch list”. Our last two investment properties were from my “watch list”. Both had drastic price reductions of $10,000. We previously viewed the properties and knew the estimated renovation costs, so once I received the price reduction alert, I submitted the offer within hours. This is one of the many benefits of using a real estate agent.
One of the most important steps in real estate investing is to figure out your potential net profit. Most likely your offer has not been submitted or accepted at this point, so your figures are merely guesstimates. We do several different breakdowns. The below example gives you an idea of how we estimate our potential profit. We do our own work, so you will not see a construction management fee in these figures.
Purchase price: $65,000
Closing cost: approx $1800.00
Renovation cost (approximate): $47,000
TOTAL INVESTMENT COST: $113,800
If sold at $145,000
Resale real estate commission and closing costs @ 7% total: $10,150
Net proceeds: $134,850
POTENTIAL PROFIT: $21,050
If sold at $139,000
Resale real estate commission and closing costs @ 7% total: $9,730
Net proceeds: $129,270
POTENTIAL PROFIT: $15,470
As previously mentioned, a construction management fees is not included. You will need to shop around to find a good contractor and the best payment option. My husband, (Brista Homes), uses the following agreement with local investors. His company does not charge any up front costs for the construction management and handles all aspects of the renovation including pricing, design, and color selections. The investor splits the net profits with Brista Homes. In essence, the investor puts up the money and two – three months later receives a return on his investment.
Real estate investing requires doing your homework, but don’t get stuck in the homework phase. The sooner you get started in your real estate investing career, the more comfortable you will become. It’s like with anything, the more you do, the more you learn.
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Thank you for reading. I hope you find this blog post informative. Please feel free to contact me or comment below with any thoughts.
For more information on Lakewood Ranch Real Estate, Sarasota, Bradenton, or the surrounding areas, as well as any other aspects of life in the Lakewood Ranch area, please do not hesitate to contact Gina Ursini at Keller Williams Realty or visit http://SarasotaHomesCollection.com.