Before you start looking at houses, you must know what kind of investing you want to do! Why? Because this will help you determine what kind of property to buy (condo, multifamily, manufactured, etc.) AND what price you can go up to for the investment to still give you a positive cash flow or the net profit you want from re-selling.

Here are a few examples;

Framed Stick Built houses - If you can rent a 3 bedroom home in your neighborhood for $720 per month, and you want a positive cash flow, look for homes $84,000 or lower. With 20% down, your 30 year mortgage @ 6% will be $520 per month assuming your insurance and taxes do not exceed $1200 per year. You have a positive cash flow of $200 per month. Even if you hire a property management company to handle your investment and they charge you 10%, your cash flow will still be positive at $128/mo ($1536/yr). If that house becomes vacant for 2 months, you will break even, and if it’s vacant any longer you will be negative. Don’t let a small temporary negative cash flow deter you from making the step to invest…over the long run your property will increase in value if you take care of it.

Condominiums - Get a calculator and a telephone for this…Condo’s aren’t always what they appear to be on the surface. Just because it’s under $100k and it’s on the ocean doesn’t mean you will see profit! Research these carefully. If your intention is to have use of a summer place for 2 weeks or so without having to pay anything, you probably can find many places to choose from where the numbers work, but if your intention is to see a net profit of $20k per year from nightly rentals USE THAT CALCULATOR AND TELEPHONE. You need to see the rental history from the unit you are looking at for the previous 12 months, 2 years would be better. Find out what the seasonal rates are, what the management company charges to rent it for you (and EXACTLY what that fee includes). Ask how the units are rented…does the management company use a “Grading” system to determine which unit gets rented? Or is it a simple “Rotating” method. Find out when the last “Special Assessment” was done, what it included and if there are any Assessments being discussed presently. The last thing you want is to close on a condo and the next month get a letter stating you will pay $400 per month for the next 3 years because the building needs new windows and decks…

Investing in Condominiums can work, but there is definitely more research that needs to be done on these than the average residential house.

Numbers can be figured out for any type of property, you just need to sit down and do it.

Make sure it’s accurate and that you have included ALL POSSIBLE MONTHLY AND YEARLY COSTS such as Homeowner Association fees, taxes and Property Management charge if you will be using one.

Now that you know what kind of property you will buy, get yourself pre-approved for a loan. Tell your lender if your purchase will be a condo, manufactured home, multifamily or framed house. Qualifying and loan processing are different for each type of property. This will make their job easier and your final closing less stressful to everyone involved.

Financing on used manufactured homes has experienced a lot of changes in the past 12 months, and there are more to come. FHA loans are becoming more popular on manufactured financing because currently this is the ONLY 100% loan possible. The investors won't get the 100%, but your end users can. With B & C lenders dropping like flies nationwide, we won't be surprised to see more of these FHA loans coming in. Typically it is easier to get a mortgage for a framed house or condo than it is for a manufactured home. Keep this in mind when working with your lender.

Find the Real Estate office in your area that specializes in foreclosures and Bank owned properties. Work with an Agent there that you feel comfortable with, and start analyzing the properties that are available to buy from the foreclosure list here. Buy this time, you already have your numbers worked out for maximum purchase price, you know what type of property you need, and you have a pre-approval. With your Realtor, go through each one below your maximum price, toss out the ones that immediately you have no interest in. For the remaining ones, have your Realtor call the Listing Agents to see if there are any offers on them and get as much information over the phone as they can. By the end of this process, you probably will have another bunch to toss out.

Absolutely hate REALTORS? No problem... you can still find, offer and close without one.

Just keep in mind that REALTORS have a network with each other, and if they are on the ball (which are the only ones you want to work with anyway!) they are definately another avenue to finding an successfully offering on REO's. If you say no to the help of a REALTOR, basically you are saying "No, I don't want to make more money this year".

Outside of REO's, REALTORS also will have access to sellers in distress, which is another profitable way to make money in real estate. Many MLS systems don't allow the listing agent to publicly state "seller in distress" and a good agent would not let the public know the sellers situation anyway if they are truly working for their seller, but there is private REALTOR to REALTOR remarks that you won't be privy to, that let's other agents know - hey, here is a REALLY motivated seller!

With your Realtor, go look at the remaining properties and be prepared to make an offer. Out of the ones you look at one, or more, may work. Make an offer, and keep your emotions out of it. Do NOT go above your maximum price. If you decide on a property that already has 2 offers on it, don’t play around with your price. Make your offer high and strong. For example, you have a pre-approval for up to 90k on a framed house, you find a foreclosure listed at 69k in an 80k neighborhood. The numbers work at full price. Your Realtor tells you there are 2 offers already on the house, but the seller has not countered with anyone yet. Make an offer immediately for full price. YOU will get the property. It’s human nature to want a good deal, to feel like you got a good deal, you MUST REMEMBER even if you pay the asking price, YOU HAVE JUST GOTTEN A GOOD DEAL! You have a house that will appreciate in value, give you positive cash flow, an immediately have 11k in equity. THAT IS A GOOD DEAL.

If there are no other offers on a property, start your offering about 18% below asking price.

BE PATIENT while waiting for a response from the seller. DO NOT GET ANGRY if it takes a week or 10 days even to hear back from them. DO make sure your Realtor calls the listing Agent daily to check on the status. This is not being aggressive, this is good business. You don’t want to loose a property because the agent wrote and presented your offer, then just waited to hear back from the seller. What if there was a problem along the way…the fax didn’t go through completely, it was lost in the shuffle of someone else’s office…the “what it’s” are endless. The point is, the more times your offer is talked about, looked at, sent and resent, the greater your chances of getting it. Stop and think about your job, who do you do more follow through with, who do you work “quicker” for…the customer that (politely) demands attention, the one that says “hey, I’m here, don’t forget me”, or the one that’s nonchalant, the “whenever it gets done is okay” customer?

Make your presence, and your offer, known. The right Agent can do this in a professional, courteous, firm way.

IF ANOTHER OFFER IS MADE ON THE PROPERTY WHILE YOU ARE WAITING for a counter-offer, chances are you (and the other buyer) will be “Highest and Bested”. THIS WILL BE YOUR LAST OPPORTUNITY to make a strong offer. After all buyers are Highest and Bested, the seller will choose the STRONGEST offer. If it is not YOURS, you just lost the property.

Congratulations! Your offer was accepted! And now you need to move quickly. If you are given 10 days for a satisfactory home inspection, don’t wait until the 9^th day! Get it done ASAP. This way, if you find out the house has major structural damage that you don’t want to bother with, you can walk away from the contract and the seller can get it back on the market faster. This is common courtesy for the seller. There will be someone else that won’t be bothered by the structural damage.

As soon as your home inspection is done, and you are good with it, have your attorney start the title search, and start shopping for homeowners insurance (price shopping is a good thing!). YOU are the main player in this purchase, so be sure to RETURN ALL CALLS PROMPTLY AND PROVIDE ALL PAPERWORK NEEDED IN A VERY TIMELY MANNER. If your attorney needs something from you, get it ASAP, your Agent the same thing. You will be working most closely with your Lender at this point, it is imperative to get them what they need.

The number one reason for delays in closings is because the loan is not ready.

Bring a certified bank check to closing for the amount your Attorney has specified, Sign all your closing papers, you are now officially an Investor! You may get a key at this time, or you may have to wait until the Deed has been recorded. Ask your Realtor…

Hire out or do it yourself, either way get it done fast! If you purchased to rent, put an ad in the newspaper the day you close, even if repairs are not done or complete. You want to have a line of people waiting for your property and plenty of time to qualify potential renters.

Most work, even if it’s major and hired out (such as roof replacement) can be completed in a month. Make your goal to have it completed in a month or less so you can start to see your profit.

Speed is still the name of the game! Procrastination will pickle your profits, so don’t delay! If you will be renting, show your property while you are doing repairs and let your renters know what is being done and when it will be ready to move into. If you plan to put it back on the market, COMPLETE THE REPAIRS FIRST! Home BUYERS are a little more finicky than RENTERS and their first impression of the house will last. If you are marketing your home at fair market value, you want your property to be in tip-top shape so they buy yours and not the one down the street.

If your intention is to own multiple investment properties and keep them indefinitely, APPLY YOUR NET PROFIT TO THE PRINCIPLE ON YOUR MORTGAGE! Don’t buy with the thought that after you have a renter, you’ll have an “extra” $300-$400 a month to spend…Buy your property instead with the thought that you will not see any profit for 7-10 years! By paying down the principle on your mortgages you can reduce your loans by YEARS and save yourself THOUSANDS AND THOUSANDS in interest. This will also make more equity available to you so you can purchase more property.

If your intention is to “flip” the property, take out a 30 year loan so you’ll have the lowest possible monthly payment which will reduce your holding costs until it has sold, giving you a greater net profit.

  If you are not sure what to do with your property, go back and read
            STEP 1.…KNOW WHAT YOU WANT TO DO BEFORE YOU BEGIN!!!!!

            The Foreclosure Hunter wants you to be a successful investor! You've
            just read the FACTS, not the FICTION when it comes to buying
            foreclosures! Get your Calculator...and Happy Hunting!

     Copyright © 2009 The Hallstrom Group, LLC; Michelle Hallstrom