Ellicott City Realtor Catonsville Realtor

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

Q:  How are you able to have a full time job and manage multiple Real Estate Investments?

A:  Before you ever get started in Real Estate Investing, the first thing you need to do is have members on your team.  These are people with expertise and knowledge in their field that are aware of your goals, and are willing to help you reach them.

This might give you an idea of what your team should look like:

Real Estate Professionals
Title Company
Appraiser (until you gain experience)
Property Management Company

Legal Consultants
Attorney
Insurance Advisor

Financial Consultants
Mortgage Banker
Financial Advocate
Accountant

Contractors
Engineers / Contractors
Home Inspector
Handyman

Support System
Partner, Spouse, Family
Business Owners
Other Real Estate Investors 

Q:  How do I get started in investing in Real Estate?

A:  We're all getting blasted with emails about how to invest, particularly in foreclosures.  It doesn't matter what type of investment you choose to do - the offers are out there on the TV, radio, email....

Before you spend any money on books and cd's and videos and memberships and subscriptions....give me a call.  I'll share with you my knowledge, experience and expertise for free.  No obligation.  No commitment.

Why would I do this?  To spare you the headache, heartache and expense of going down the wrong path.

Q: Isn't investing in Real Estate risky?

A:  It can be, depending on your experience and knowledge, and how you choose to use it.

One of the first things I ask myself is "What is the worst case scenario, and can I live with it?".  Take a good, hard look at what the worst case scenario might be.  It might mean paying a monthly payment on your own because you don't have a renter, running out of rehab money and possibly getting a partner, underestimating costs, and the worst of the worst:  being foreclosed on.

Your best ally or advisor when looking at the worst case is someone with experience - someone who's been there, someone who's done that.

Q:  I'd like to invest, but doesn't being a landlord mean a lot of work and headache?

A:  Being a landlord may not be easy.  There can be problems with people, and there can be problems with your building.  As for people, there are several ways to get good tenants:

            Good credit
            Good income
            Good references
            Good criminal background checks

Do this up front, and the likelihood of having problems later is much less. As for the building, do routine maintenance and when you have a problem, fix it right, not cheap.

Take time to do things right the first time, or make time to do it again.

Q:  How can I invest when I don't have any money?

A:  It's never about the money - it's always about the deal.  (If you've been reading this series, you already know this).

If you don't have money, spend time instead.  Educate yourself about value, and on how to find a deal.  It's never been the case that I've found a really good deal and couldn't get the money.  I've always been able to find partners with money when I didn't have any.

My motto is:  50% of something is always better than 100% of nothing.

Q:  Tim, don't the Realtors keep all the good investment deals for themselves?

A:  As Realtors, we go through more to purchase a home than any other investor would.  If  we're working with a Seller client, we have to treat them honestly and ethically.  If we're working with a Seller we don't know, we have to disclose in writing that we (the Buyer) are licensed Realtors.  In a case where we are purchasing a property from a Homeowner, we have to go over the comps and discuss how much other homes in the area are selling for, unless we want to get sued later.  We also go over closing costs, and any other information that is beneficial for the Seller client, because we must give them the same treatment we would give any other Seller, and because our license is always on the line.

This isn't law, just the way I choose to do it.

If you were an investor trying to purchase an investment, would you first take the time to explain to the Seller what he could get for his commodity if he put it on the open market?

So......with our practices in mind, do you think we necessarily get the best deals?

If you'd like more information about Real Estate Investing, I have a free twelve week seminar, beginning February 18.  For more information, click here.

Question:  How do you find a great deal in this market?

Answer:  This is a very common question that I am asked all the time.  And my answer may surprise you - You may not need to find a great deal.

Whether a deal is "good" or "great" truly depends on why you're investing in real estate to begin with, versus the deal itself.  In order to evaluate if buying a property is a good investment for you, you have to identify your goal.  Is your goal:

• Cash flow
• Equity
• Write-offs
• Retirement
• Vacation Home

...I could go on and on, because there are plenty of reasons to buy real estate.  Keep your goal in mind when searching for your "great deal".

Consider our investor from last week:  He wanted to buy a home now and keep it for 17 years so that he would have enough through equity and appreciation to sell the home to pay for his kid's higher education.  He needs to find a "great deal" where the positive cash flow could be minimal or break even.  His renters would pay the mortgage, and the home would appreciate.  For him, this is the bottom line of his great deal.

But consider another scenario.  For someone who wants good, positive cash flow today - why would he buy the same property as the first investor above?  For him, that is not a great deal.  That deal provides no cash flow.  This investor needs to look at small, multi family homes that provide rental income.

Bottom line for real estate investing - you  will hear me say this over and over.  Know what it is that you want to do, and look at all of the ways to make it happen.

Stop looking for the "great deal".  Unless you know your goals, you're not going to find it.

Q:  Is it a good time to buy an investment property?

A:  It could be a good time depending on what your financial goals are.  Whether it's a Buyer's Market or a Seller's Market doesn't matter as much as the deal itself.  Will the deal meet your goal, whatever that may be.

For example, you've just had a baby.  You're thinking ahead, and you ask yourself how am I going to pay for this kid's college?  Here's something to consider:  You purchase an investment property now to rent.  Naturally, you'd like to have positive cash flow, or at least break even.  You never want to lose money.

Consider that your baby is not going to college for 17 more years.  If you purchase a property for $150,000, at 3% per year appreciation, that would value the property at $247,000 in 17 years.  You'll get the standard tax deductions for owning a rental property over the next 17 years, but look at the equity position that you'll be in by the time your baby graduates from high school:  Rents will have appreciated over the 17 year period, while your principal balance has decreased.  At a mortgage interest rate of 6.0%, after 17 years you would owe approximately $97,000.  Do the math - what's your equity?  Roughly $150,000.

At that time, you could sell the property and cash out to use the money.  Or you could refinance the property and take out money to pay for school.  Even if you don't have enough equity to pay for all of the schooling, you've given yourself a good head start.

So is it a good time to purchase a rental property?  What do you think?

If you'd like more information about Real Estate Investing, I have a free twelve week seminar, beginning February 18.  For more information, click here.

To submit your Real Estate Investment Question, click here.