This weeks column is by Rick Davis, a Realtor with RE/MAX Area Experts. Rick also owns a property management company called Stateline Rentals. He can be reached at (815) 986-3836. His Web site is www.RickDavisRealtor.com and his e-mail is Rick@RickDavisRealtor.com.
Over the last few years, real estate has caught the eye of anyone who watches home improvement shows. As many people get into real estate, the same number drop out. The reason for this is the lure of easy money. Then, when the part-time investor gets in over his head with things he cannot do or afford to pay other people, he bails out.
Renovation to me means fixing, cleaning, updating anything on a property to add value. By adding value then, you have a nice chance of making a profit for your effort. You can do as little as a new roof, paint, landscaping or just cleaning out the stuff left in a property. I have done many renovation projects, and you cannot believe the small amount of things you can do to add value.
Flipping means buy something low and turn around and sell at a higher price.
Its the American dreambuy low, sell high. There are people who would say it is the same thing as renovation. I am not one of those people. I would like to get rid of the term flipping, it just sounds cheap. Lenders hate the term flipping so much that over the past five years, they started to add seasoning to their loans so you have to hold for X amount of time before you can sell. And if you sell before that time, it will cost you.
I would like to give you some examples of different types of property to buy. Most people want to buy foreclosures or pre-foreclosures, but there are also HUD homes, auction homes, sheriff sales, short sales and regular multiple listings from your Realtor. There are many other places to look, but this is a good start. Be careful; the word foreclosure gets people thinking they can steal the property. If you are looking at this property, just think how many other people are thinking the same thing. You have to know what the property will sell for as a finished product. I feel the best way to find this is experience, or find and become friends with a local Realtor. They will help you more than you think. I was an investor before I became a Realtor, and I used Realtors to help me when I needed it. The one thing you should do with your Realtor is reward them with your listings or buys. If you buy with them, use them to sell, be loyal, and they will call you first every time they find a good property. But if you feel you must do this yourself, I recommend using a lawyer. I have found the best properties on the regular multiple listing services through my Realtor. Most investors dont think that. There are a lot of people who have owned their property for a long time and want a quick close and under-value what they have. Other great deals are inherited property, retiring, relocating, downsizing or buying bigger. Can you see all the reasons to look on our local Rockford Association of Realtors multiple listings? I would encourage you to look outside the box by buying multi-family, apartment buildings and duplexes.
I think renovation or flipping is always going to be here. I feel buying and holding for rentals is right for the way our market is currently. There will be huge numbers of one-, two-, three-year arms due, and a lot of people will be unable to pay and want out, but will not want to live in an apartment. How about single-family rentalsyou flip or renovate for profit, but you hold for wealth.
First-time investors that want to go into home renovation should seek out a mentor or a club that can help you from start to finish. If you want your learning curve to get faster, join a Real Estate Investment Club that will share their failures and triumphs. I joined a club called Midwest REA of Chicago when I first started, and it has changed my life forever. We meet once a month. After four years of driving to Chicago to learn, I started my own club here in Rockford. We call the club Midwest REA of Rockford. We meet the second Thursday of the month. Those of you wishing more information can check out our Web site at Midwest REA of Rockford.
Another great way to help your real estate career is a mentor. I have a mentor still, and I am always learning from his experience. I also mentor other people myself. Its amazing how someone who has been through many deals can make your confidence high because you can always call them and get their help.
James Frazier is the owner of A Defined Design-Professional Home Staging Service. He can be reached at 815-997-3212 or through his Web site at www.adefineddesign.com.
from the Oct. 17-23, 2007, issue