Ellicott City Realtor Catonsville Realtor

Tenant Thursday: But I'm Not a Real Estate Investor.  Yesterday I met a woman who was interested in selling her investment property.  She and her husband purchased this small, multi-family unit in Arbutus many years ago and had been renting it out ever since.

Recently, her husband passed away.  She's simply not able to maintain the property and keep on top of the tenant issues any more.  She knew that I owned a multi family unit nearby, and contacted me to see if I was interested in purchasing her property.

I asked her how being a Real Estate Investor over the years had benefitted her, and she replied, "Oh, but I'm not a Real Estate Investor!"  It made me smile, and I certainly wasn't about to argue with her, but I have news for property owners:  if you own a home (real estate) in which you don't reside, and you use that home to make a profit (invest), you are in fact a Real Estate Investor.

I guess people think that to be considered a 'Real Estate Investor', you must own multiple properties, develop subdivisions, flip homes weekly and possibly have the last name of Trump.  And while those individuals are also Real Estate Investors, so are you, the single property landlord.  I think it's important to keep this distinction in mind, because as you make decisions concerning your property, you have to think of how those decisions will affect your bottom line.  When you forget that your property is an investment, and treat it like your own home, you can run into a lot of trouble.

Attention Real Estate Investors: follow this blog.  On Thursdays, I frequently post advice about Real Estate Investing.  Right now I am doing a series on common Tenant issues, and how to handle them.  You can also find more content under the topics of Real Estate Investing, Thursday Q & A, and Tenant Thursday.  And you can always contact me if you have a topic you'd like to see covered in the blog.

Photo courtesy of: Eric Rhoads

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered

Q:  What expenses should I plan for when selling an investment property that I have rehabbed?

A:  The only way to handle this is to Do Your Best to Plan for the Worst.  You need to know ahead of time how far you are willing to go to help the Buyer buy this home.  Will you offer:

• Maximum Closing Costs (Currently FHA loans allow up to 6% of the purchase price, and VA is unlimited)
• Seller Financing
• To make necessary improvements

Keep in mind the current market conditions and what they call for.  If you would like a detailed list of settlement expenses for your investment property, or help in making a plan to sell, please feel free to contact me.

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered

Q:  I've found a property that seems like a really good investment deal.  The only problem is that the Seller wants a quick settlement and doesn't want a lot of contingencies in the contract, or to have to do any bank related repairs.  Is it still a good deal?

A:  Is it still a good deal? It could be, however, it's only as good as what you can sell it for later.  This has a direct effect on what you're buying it for now.  If the Seller doesn't want any contingencies, tell him you have to have an inspection and that you'll take a few DAYS to get it done.  That way, should anything come up, you're done with it quickly and both you and the Seller can move on.

Buying your first investment property can be tricky.  If you have questions, or need advice, please feel free to contact me.

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered

Q:  I'm thinking of purchasing an investment property that was built in 1942.  What are the concerns about lead based paint?

A:  Any property built before 1950 has to be registered with the EPA because of the concern over the presence of lead based paint.  There are still Agents listing properties and representing Sellers that haven't taken this step.

My advice:  if you are purchasing a pre-1950 property as an investment property, make the Seller register the property with the EPA.  Otherwise, you  could be buying a lead paint problem.  AND...if there is a tenant in the property, you are putting yourself in a legally vulnerable position.

If you'd like more information on investing in Real Estate in Maryland, please feel free to contact me.

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered
Q:  How do I go about purchasing a home at foreclosure auction?

A:  So far we've talked about due diligence, and what to do on the day of the auction.  Today, it's time to talk about the Bidding Process.  The most important part of the Bidding Process in a Foreclosure Auction is keeping your emotions in check.  The Auctioneer's job is to get people to pay more money for the home.  You've got to be able to keep your head on straight and remember that this home is an investment - you're not going to live there.

Before you go, know exactly how much you are willing to pay at the foreclosure auction.  If you're not comfortable committing to a specific number, have your ideal number in mind, and consider going a specific percentage above that number.  Use this method to figure out the most you are willing to pay for this home, and don't go $1 over this number.

It is especially important at a foreclosure auction that the auctioneer reads the entire ad.  Request it if you have to.  In the case of a foreclosure auction, if you purchase the home for less than market value (which you'd really like to do), the Homeowner can dispute the auction process (particularly if your purchase price is drastically less than market value).  My attorneys have explained to me that in cases like this, that a Judge will probably rule in favor of the Homeowner because the process wasn't followed, and the auction will be invalid.  Judges don't want to see people losing their homes if they don't have to.

The Bidding Process begins after the reading, and it goes very quickly.

If you'd like more information about purchasing a home at foreclosure auction in Maryland, please feel free to contact me.

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered

Q:  How do I go about purchasing a home at auction?

A:  Last week, I talked about some of the due diligence you need to perform before the auction.   On the day of the auction, you need to be prepared as well.  You'll need to have a deposit check in certified funds for the amount listed in the auction notice.  You'll need to give yourself plenty of time to get to the auction.  Don't be late - the auctions happen very quickly and if you're just two minutes late, you could have missed your opportunity.

On the way to the auction, call the auctioneers at least twice to see if the auction has been cancelled.  Many times the auctions are cancelled at the last minute and it can be a big waste of your time if you get to the courthouse and the auction is off.

Preparation to buy a Maryland home at auction is essential.  If you're a first time investor, knowing what to expect can help lead you toward success.  Next week:  The Bidding Process.

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered

Q:  How do I go about purchasing a home at auction?

A:  The first word that you need to think about if you are going to buy a property at auction is preparation.  For instance, if you're going to a foreclosure auction in the great State of Maryland, they happen at the courthouse steps, not at the property.  So you don't get a chance to go in the property to see it before you buy it.  In fact, you probably run the risk of great bodily harm or death if you go to the home.  If you go to someone's home to view it or ask questions, they're probably not going to be happy that you're trying to profit from their misfortune.

That being the case, in a foreclosure auction, there's plenty of due diligence to be done.  Here are just a few that I would do:

• What's sold in the area recently, and how it compares in age, square footage and condition
• You can find out how many mortgages the Seller has, because it may not be worth your while if they owe more than the value of the property.  In these cases, the bank usually takes them back.
• You want to find out if the taxes have been paid

This is a short list of a much longer list that I'll be blogging about over the next several weeks.  If purchasing a foreclosure property at auction is of interest to you, be sure to subscribe to this blog to follow the Thursday Q & A conversation.

And if you're an experienced investor, what diligence do you perform before an auction? 

Q:  I've purchase a home once already, and I did pretty well in the deal.  What's so different about buying an investment property?

A:  I've said them all before, but I will say them here again.  The differences seem simple:

• You do not fall in love with an Investment Property
• You do not fix up an Investment Property the way you would fix up your own home.
• An Investment Property is all about the numbers.  Unlike your home, whose primary function is to be your residence, an Investment Property's sole function is to make you money.  There is no other purpose.

It seems simple.  You would be surprised once you get caught up in the emotion how quickly you might forget these things.

If you're ready to purchase an investment property, give me a call.  I'll help bring you back to reality and determine if your excitement is based on the numbers, or on the emotion.

Q:  I've found a deal, and it's a deal that helps me meet my long term goal. NOW can you tell me how to evaluate it?

A:  If you know what your long term objectives are, and the deal helps you meet them, then the next step is to gather some information about the property.  Here in Maryland you can use the Maryland Department of Assessments and Taxations Real Property Data Search.  From this site you should get the following basic information about the property:

•             Year built
•             Number of Bedrooms
•             Number of Bathrooms
•             Finished Square Footage
•             Lot size

Once you have this information, you can begin to find similar properties with similar amenities.  Everyone knows about websites like zillow.com, domania.com and realtor.com, and you can use those sites to find properties for comparison.  The two biggest problem with these sites is that the information is often not current or updated.

Another option is to sign up for a Listingbook account.  Listingbook is the service that I use to keep my clients informed about properties on the market here in Maryland.  The information is pulled from our local Multiple List Service every 15 minutes, and you can review homes that have sold, and even homes that are under contract.  Listingbook is the only service in our area that provides this information to consumers online.

And of course, you are always welcome to call me.  I can give you a thorough analysis of your property, and of comparable properties in the area including Seller Subsidies that may not be reflected in the research you are able to do yourself.

Thursday Q & A - Your Maryland Real Estate Investing Questions Answered

Q:  What are the most common mistakes you see novice Investors make?

A:  The list that we're talking about looks like this:

• Falling in love with the property
• Always using the best case scenario
• Not performing solid due diligence
• Not planning
• Forgetting to consider how this deal helps your other financial objectives (the big picture)

I've talked about falling in love, using the best case scenario, not performing due diligence and not planning.  Now it's time to talk about your financial objectives.  Your goals. The Big Picture.  If you've been reading this series, you know I've talked about it here and here, and I'm going to talk about it again HERE.

Again?

Yes.

Why?

Because -

In the grand scheme of things, if you're not going to meet your main goal and objectives, then what is the point of entering into what could be a costly Real Estate transaction?

Know your goal.