Nov
05

Tips to Make Money – Real Estate Profits

By
Martin Loader asked: There are various ways to make money real estate. When property prices are rising everyone is happy and can make money. When times get tough, there are other ways to make money real estate. I have four properties. One I have renovated and three I have bought new. All are being rented out. I started getting interested in making money in property after I restored my girlfriend at the time’s house. It took two years to finish and I loved doing it. She made about $100,000 dollars on that one. I then bought a house with her this time. This one took about two years again. I totally gutted, restored and doubled the size of it and in the end we separated and she bought me out for about $60,000 dollars. My third restoration project, I bought a house with my best mate. This one took four years of blood, sweat and, tears, literally. We still have this one and are renting it out. Forced Appreciation. Buying run down properties is a great way to make money real estate. If you have experience in renovation, you can make more money but what I have found, it is not necessarily the best way to go. In future if I restored another property, I would get professional builders in to do the work. It’s all about time. The last property I restored with my mate took four years to complete. If we had builders come in, it would have been finished long before. We could have sold it and used the profit for further properties. Although we will make more on this particular house when we sell it, in the long term we would make far more money getting them turned over quickly. The rough calculation to use when buying, restoring and selling properties is one third, one third, one third. If buying a house for $300,000, for instance, I would expect to spend about $40,000 on materials, $40,000 on builders and make $40,000 in profit. As I say, we would save $40,000 on builders, by renovating ourselves, but it just takes too long. You can only restore one property at a time that way. Use the bank’s money to work for you. (Leverage). I had an argument with a friend of mine. He was insisting that if he had $300,000, he would buy real estate for cash saying it’s safer because you can’t get your house repossessed. True, but I would rather use the bank’s money to buy my real estate for me thank you very much. It’s their money at risk. If I had $300,000, I would get three properties at $300,000. How? You see your bank manager and ask for 75% loan to value mortgages. You put in 25% deposits on each property. 25% of $300,000 is $75,000. 3 x $75,000 deposits = $225,000 in deposits, leaving $75,000 for eventualities such as insurance, tax, in between tenants etc. You rent out your real estate and that will pay for your mortgages. This is a long term strategy for capital growth and not intended to make money real estate out of renting, although if you can make extra bucks from your tenants, then great, bonus. Although times are tough at the moment, they will get better. They always will. They always have done. Property will double in price and then double again eventually. In twenty years time, your place could well be worth four times the value of it now. How to make money when property prices are dropping. (Great for times such as these) This is a technique that only a few astute investors know about and a great way to make money real estate in harsh economic climates. You can pick up real estate as low as 20% of it’s value because banks want to avoid foreclosures at all costs. When banks make a foreclosure on a property, it reduces the amount that they can borrow from the Federal Reserve and reduces what they can lend to the public and in doing so reduces their profits. real estate investing tips
 

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