Real Estate Investing Tips For Beginners

You can make money in real estate by investing in four different ways: By real estate appreciation on properties you own, via cash flow from rentals, from commissions if you are a real estate agent or broker, and by investing in services offered in commercial buildings such as apartments complexes or businesses you have an interest in.

The Pros and Cons of Real Estate Investing

Buying property is one of the most lucrative aspects of real estate investing. However, there are risks involved. The risk is lower than the stock market and you could have steady cash flow. You also earn tax breaks and benefit from long-term ventures. However, the cons include:

  • Returns are not as high as those in the stock market.
  • You need quite a bit of start-up cash.
  • Properties are not easily liquidated.
  • If you invest in apartment complexes, maintenance and dealing with tenants are often challenges.

Tips for Beginner Real Estate Investors

Before you even start with your first investment, you should do thorough research on investing. These tips are just some of the factors you should know before you plunk down your hard-earned money.

1. Know and Understand the Costs Involved in Any Type of Real Estate Investing

Regardless of how you decide to invest in real estate, know what costs are involved. If you are investing in REITs, know if and what fees you need to pay. If you buy a property to flip it, make sure you know how much you will need to fix that property up so that you can get the best return on the property. For services, you should know what licenses your city, county and state might require. And, with any type of real estate investment, know how your investments will affect your taxes.

2. Determine How You Want to Invest

How you want to invest means you select certain property types. If you want to become a landlord, you can choose apartment complexes, commercial properties, or you can buy several single family homes to rent out.

3. Know Your Location

It’s easy to decide to buy a less expensive home in a less-than-stellar neighborhood. But, you have to take several things into consideration, including the value of the property. If you have to put $60,000 into a property to get it ready to rent or sell, can you get enough to make a profit? If you paid $25,000 for a house and put $60,000 in it, but you can only sell it for $75,000, you’re going to lose out. Furthermore, if you can only rent it for $500 per month, but your mortgage payment is $550, you’ll end up losing out instead of creating an income.

4. Risk Management

As with any business, investing in real estate comes with legal risk because you are dealing with people. Setting up a company helps you mitigate some of that risk. If you set up a corporation and have the properties buy the corporation, those who may want to sue you cannot come after your personal assets as long as you set the corporation up properly. You should always discuss risk mitigation with a business attorney. A company also helps you control and manage your finances since you cannot co-mingle the money with your personal money.

Plan to start out small. While there is a sharp learning curve when going into real estate investments, it doesn’t have to be intimidating. When you start out small and do your research, you’ll be more likely to succeed.

7 Basics of Serving and Selling An Arizona Real Estate Listing

There are a lot of different ways to sell a property, but there are some fundamentals everyone should follow. Whether you’re brand new to the world of real estate or you’re a longtime pro, it’s easy to get caught up in everything going on and miss out on some key details.

Today’s market is as competitive as ever, so make sure you’ve got the basics covered:

1. Price it Realistically

Even seasoned real estate veterans sometimes get over zealous with pricing, or worse, allow clients to get wildly unrealistic with the asking number. But local neighborhood values change every year, as does the market in general. It’s important to get the home appraised and look at actual selling history for the area. Go too cheap, and you’ll lose money. But go too high, and you’ll end up waiting a long time for a buyer to come around. 

2. Don’t Conceal Information

Appraisers will appreciate you be upfront about any potential issues or damage to the home, as well potential buyers. In fact, concealing such things could lead to a lawsuit down the line. Make what small fixes you can, and document the rest to have it on record. Doing so will also help build your reputation if you hope to continue in the Arizona real estate market.

3. Clean and Stage

When people visit the property, they should be able to easily envision what life could be like there. While you should never keep the place cluttered with furniture, it’s a good idea to have some accents here and there to help demonstrate the space for what it could be. Naturally, always clean the place thoroughly before any potential buyers see it. 

4. Don’t Neglect Exteriors

The inside of the property is crucial, but the outside is what potential buyers will see first. Especially in Arizona where so many homes have manicured front yards and stone gardens, an unkempt property sticks out like a sore thumb and won’t be appealing. You don’t have to go all out, but do make sure it is tidy with curb appeal. 

5. Take Photos Seriously

It’s astounding how many photos you can find on real estate websites that show left-out cleaning supplies or garbage, or are even snapped from awkward angles that don’t show off the space. Your listing will stand out and attract the most buyers with clean, clear photos. Arizona is known for its bright, sunny days, so there’s no excuse for snapping photos on a cloudy, dreary one that doesn’t put the property in the best light. Consider hiring a professional for the job.

6. Execute a Marketing Plan

Don’t just stick to one real estate website. Publish detailed listings (photos and all) on multiple high-traffic websites and consider spreading the word via social media. If you are a real estate agent, keep in mind that your marketing endeavors will not only help sell the property, but they will also keep the client happy with your efforts. 

7. Be Flexible

Sometimes potential buyers need to see the property after hours or have a lot of questions about it. Be open to flexibility, and schedule appointments based on the buyer’s interest and likelihood of purchasing, not your own personal schedule. Additionally, be at least somewhat flexible with pricing and know what your minimum acceptable offer is. 

Real Estate Investing Tips During Coronavirus

Over the years, real estate investing has become a popular option to strengthen investment portfolios and to create a passive flow of income. While this aspect of investing is constantly changing, major changes have recently taken place as a result of the Coronavirus. With many areas entering stay at home orders with fewer people venturing out and concerns over the virus in general, many types of businesses have slowed down. As you approach your real estate investing during the aftermath of this pandemic, there are certain tips you need to follow to ensure your investments continue to provide the return you’re looking for.

Don’t Give Up

Although it may feel as if the world has stopped entirely, it’s important not to give up on your real estate investing ventures. In fact, now is a great time to keep going because prices and interest rates will be lower and you’ll be more likely to get the properties you’re interested in. However, this doesn’t mean you shouldn’t make any changes to how you do things. It’s critical to remain flexible, learn how to obtain secure funding and continue to network, even if it’s online.

Increase Your Marketing

Even if it feels as if no one is buying or selling, the truth is a lot of people are in need of money right now. This means they’re more likely to let go of properties they don’t really need or they were holding onto for sentimental reasons for the sake of making money to live. Increasing your marketing efforts will help you reach these people and find properties for sale you might not otherwise encounter.

Buy for Less

Don’t be afraid to offer less than the asking price when you do buy property. Sellers are understanding people will be less willing to pay more for property at this time so they expect to receive these lower offers. However, keep in mind there’s a chance property values may continue to drop for a period of time, so you’ll need to be prepared to absorb that drop or wait until prices rise again before selling.

Complete Virtual Transactions

More companies are going to contactless interactions where they meet through video conferencing and telephone calls, rather than in person. It’s easy to look for properties online or list them for sale online. While people will want to see a property before they buy it, for the most part, you can complete most of the steps involved in buying and selling can be done virtually.

Prepare for Long Periods on the Market

You may be used to buying a property, flipping it and selling it for a profit in a relatively short period of time. However, this isn’t necessarily going to happen at this point in time. For many investors, buying properties you intend to rent out may be more lucrative for the time being. However, if you do choose to purchase a property you intend to sell, be prepared for it to spend a longer amount of time on the market before it sells. Higher priced properties will sell slower than lower priced properties.

Expect More Stringent Lending Requirements

Lenders are also tightening their belts. If the last housing market crash taught them anything, it was to be careful about lending money to individuals who are in a rough financial situation. They aren’t interested in falling victim to this problem again. Therefore, they have made it more difficult to qualify for loans, which can have an impact on your ability to purchase properties.

Start Real Estate Investing in Arizona with These 5 Tips

With all the rage over cryptocurrency and investing in stocks, many young adults are still using real estate investing as their portfolio’s strength. According to a recent survey, 36% of millennials prefer real estate investing as their main strategy to accumulate wealth. But young adults aren’t the only ones using this method – most Americans are, too. In fact, 31% from all backgrounds are harnessing the wealth building power of real estate investment.

When it comes to investing, real estate is a smart way to diversify your portfolio. However, there are many investors who think this is off-limits to them due to their lack of knowledge. It’s time to change that. Read on to learn how you can start investing in Arizona real estate.

1. What is Your Situation?

Where do you see yourself? Where do you want to go? Who do you want to become? What are your goals? Your career path? The answers to these questions will help you develop an investing strategy for the future, along with the best type of loan for your real estate investment.

2. Gain Leverage

In general, most people believe the only way to purchase real estate is with a 30 year fixed mortgage from a traditional lender. However, depending on your lifestyle, there are other loans available. Taking the time to educate yourself about the different options available to finance a home or other real estate property will shift your entire belief system and you’ll see that you have access to funds through channels you never knew existed, such as adjustable rate mortgages and interest-only mortgages.

3. Compare Mortgage Loans

The loan you choose is a well-planned product, and the product you want to select is the one with the lowest interest rate and the highest stability. Use a mortgage calculator to help you do the math and compare different mortgage loan products.

4. Gather a Strong Team

You can’t and shouldn’t go this alone. And you should be careful about who you decide to place on your team. Having a financial advisor is the first support system you’ll need. Next is an experienced real estate agent. Both professionals will ask the right questions and guide you along the right path to success. Tip: Keep an ongoing relationship with your mortage loan officer as he or she will be able to give you information regarding the market and when it might be a good time to refinance.

5. You Need to Plan for the Future

When thinking about the future, consider that rental properties provide both investment appreciation and cashflow, but they may not provide them at the same time. For this reason, it’s important to determine why you’re investing in the property. Do you want cash flow now and in the future, or are you looking to make a profit once the property’s value goes up and you sell? These are important details to know before investing in a property in Arizona and will determine what property you choose to purchase.

 

5 Tips to Get Your First Real Estate Deal Done

You’ve heard the stories – people making fortunes off real estate deals. Perhaps you can see yourself as one of them, but you don’t know where to start. Having some apprehension when beginning a new business venture is to be expected. The leap from the beginning to the end goal can feel like a huge chasm to jump across. You’re bound to make mistakes, which is probably what you’re most afraid of happening; however, if you follow this simple guide to effectively getting your first real estate deal done and done well, you’ll see the momentum pick up. Read on to learn more:

1. You’ll Need the Right Representation

The real estate agent you decide to work with can determine the outcome of your success. That’s why it’s so important to pick one that has extensive experience and skills in communicating, negotiating, and asking the right questions. Your real estate representative should know the area well, understand the comparables, and have sealed deals involving apartment buildings, duplexes, and the like.

2. Find the Right Property

If it’s too good to be true, it probably isn’t. Keep this in mind when seeking out your first real estate deal. Without doing your due diligence, you could end up thinking you came across the real estate deal of a lifetime only to find out later that the zoning requirements don’t add up or there is a lien on the property you purchased. Proper investigation into a property by you and your real estate agent is paramount to your financial success.

3. Schedule Several Property Inspections

After finding a property, ask for a longer than usual inspection period and have the property go through multiple inspections. It’s important to ensure there is no structural damage to the property, as well as mold, issues with plumbing or electricity, or various other issues that could end up costing you serious money down the line.

4. What’s the Curb Appeal?

If you are eyeing a property without any curb appeal or hardly any pictures posted online, chances are the seller isn’t feeling confident and will give you the property at a lower bid. You just have to offer one. After you secure the property, fix up the curb appeal and you’ve already increased your profit.

5. Negotiate Interest Rates

Chances are you probably didn’t know you could negotiate interest rates with a bank. You can – if you have a sound real estate purchasing plan. In fact, you can shop around both big and small banks, credit unions, and even private lenders to find the best rate. The better your credit and amount of collateral, the better negotiating power you have. If you can, stay away from brokers as they will take a percentage for being the middle man between you and the bank.

To make your first real estate deal a success, you need guidance from a reputable real estate agent, and you need to do your due diligence. Take the extra time to do the research that counts, even if that means someone else might come along and sweep up the property. But don’t worry, another one will come along shortly and if you stick to this method, you’re sure to make your first real estate deal an amazing success.

 

3 Rules for Buy and Hold Real Estate Investing in Arizona

If you’re interested in getting involved with real estate investing, you have a vast number of ways to go about it. Today, one of the biggest trends in real estate investing is purchasing cheaper properties in order to make renovations and flip them for a profit. However, one of the long-standing methods of purchasing properties with the intention of renting them out to generate a steady flow of income continues to be popular. Before you embark on this type of investment, there are several rules you need to learn so you can be successful in your real estate investment venture.

Establish an Exit Strategy

Although buy and hold real estate investing is intended to be used for longer term gains, it’s still important to have an exit strategy in mind, even before you begin buying property. By creating a plan for how or when you are likely to exit this type of investment, you can clearly get an idea of whether this type of investment is the right choice for you. It also ensures you have done your research and are fully prepared for your duties as a landlord. Be sure to consider what you will do if the housing market experiences another crash or what you intend to do if the property isn’t turning a profit as expected.

Utilize Your IRA

While most people try to get a traditional mortgage loan in order to fund their buy and hold real estate investments, this may not be your wisest choice. If you have a self-directed IRA, you are able to choose the ways your money is invested, including buying investment properties. You may be able to purchase residential or commercial property, as well as undeveloped land, as part of your investment portfolio through this type of IRA. However, it’s important to proceed carefully because you could incur tax penalties that aren’t worth the investments you’re trying to make. Keep in mind you won’t be able to live in the property if you take this path and you must have a balance in your IRA that can also cover future expenses, such as repairs and taxes. You also cannot give yourself a salary for managing the property yourself.

Evaluate the Property’s Potential

Just as you would carefully consider all factors before buying a home to live in with your family, it’s important to put the same amount of consideration into buying rental properties. After all, you don’t want to invest money into a property that is in a poor location that is unable to perform in a way that not only gets back the money you’ve spent, but also turns a profit. When you’re purchasing commercial properties to rent out, you will need to evaluate traffic patterns and ensure the right number of people have access to that property in order to attract customers. Residential properties should be located in areas in high demand and with reasonable average rent prices in order to be successful. These are all factors any lenders will also look at before they approve you for a loan.

Purchasing property as a buy and hold real estate investment can be a lucrative option, especially if you’re more focused on longer term investments. However, this isn’t a process that should be taken lightly. In fact, there are rules that should be followed and considerations to make to ensure you’re getting the best possible return on your investment.

10 Reasons the Arizona Vacation Property Market Is Attractive

If you’re looking to make some substantial side income or even switch careers to something more self-sufficient, then investing in vacation rental properties may be just the thing for you. And by taking the time to invest in a good property (and the right vacation rental management group to increase your renting ability), you’ll be able to not only earn a good income but also build property value, expand your net worth and just have some actual fun with work!

Of course, it all starts with knowing where to invest. Currently, one of the most promising markets in the country is Arizona. Here are 10 reasons why the vacation property market here is particularly attractive:

1. Affordable Property Tax

Arizona property taxes vary depending on property size and location, but in most cases they come out to an average 1.3 percent of the market value (most taxes fall between 0.87 percent and 1.5 percent). This is relatively low compared to other states (New Jersey has an average property tax of 2.44 percent!)

2. Lower Utility Costs

Property taxes aren’t the only things you’ll be saving money on. Monthly utility costs also tend to run low in Arizona, which is a huge benefit for rental property owners. Part of this is due to the fact that it costs a lot more to heat a home than to cool it down, and it’s no secret that heat just isn’t needed very often in Arizona homes, if at all.

3. Warm Weather Throughout the Year

Whereas other areas of the country are limited to welcoming high amounts of tourists only during peak summer and winter months, the weather in Arizona means it is a desirable location year-round! Our state gets some of the most hours of sun each year, and in fact, Yuma, AZ is officially the sunniest place in the U.S.

4. Growing Population 

Arizona has been undergoing a population boom in recent years, and now in 2020 it is the 6th fastest-growing state in the nation! This is leading to a stronger economy with an ever-growing amount of restaurants, bars and tourism destinations. And in addition to drawing outsides, it also means more Arizona residents that are interested in traveling around their state.

5. High Repeat Visitors

Once people visit Arizona, they want to keep coming back. Really, the term “Arizona Snowbird” exists for a reason!

6. Access to Property Management Companies

Especially if you are investing in more than one property, enlisting the help of a good vacation property management company is crucial to success. And thanks to the growing population and economy of Arizona, there are plenty to choose from. The right company will help your property get more exposure and build trust with renters.

7. Variety in Investment Opportunities

Whether you’re looking for an exotic desert getaway, a small valley cabin or a vibrant metro home, Arizona has it all. Price points and opportunities vary across the state, so you have an abundance of strategies to choose from.

8. Low Cost of Living

People love coming to Arizona because the day-to-day costs are often much lower than in other states. These lower costs will also help you furnish and fix up your vacation rental property into a desirable getaway without breaking the bank.

9. Transportation Options

Tourists and locals alike have more transportation options than ever before these days. Not only are there numerous car rental places just about everywhere, but Uber and Lyft are also very active in most cities. Buses also run throughout the state.

10. Proximity to Desirable Destinations

The Grand Canyon is particularly high on the list, but don’t forget about the plethora of other nature destinations here. Both Las Vegas and Los Angeles are also very accessible.

Differences in Arizona Fix and Flip Loans

Fixing up and flipping a house can be a lucrative investment, but first you need the investment. In the state of Arizona, many savvy investors use what are known as “fix and flip” loans to purchase and then quickly renovate a property to get ready for sale.

Keep reading to learn more about fix and flip loans and to determine what type may be the right choice for you and your project.

Why a ‘Fix and Flip’ Loan?

You may be wondering why you should consider a fix and flip loan as opposed to a regular bank loan. Well, fix and flip loans actually come with many advantages over traditional loans.

To start, fix and flip loans are intended for shorter designated periods of time and can even be approved faster than traditional bank loans. Experienced fix and flip lenders also do not require as much background investigation or have as stringent qualification standards as traditional banks, giving people a greater likelihood of getting approved.

Types of Fix and Flip Loans

There are three main types of fix and flip loans in Arizona. These include the following:

  • Hard Money Loan – this is highly convenient type of loan that is intended for people of all skill and experience levels (when it comes to flipping houses). Funds are approved (within 24 hours) and received quickly, allowing projects to get underway fast. While these types of loans do often come with higher interest rates, they usually include shorter terms that many people use to make a profit off of their house quickly.
  • Home Equity Line of Credit loan – A Home Equity Line of Credit or “HELOC” loan works kind of like a credit card. The investor is given a designated line of credit that is based on their existing property’s value. While the project is underway, interest is only charged on the amount borrowed during the credit line period. Now, it is important to note that this type of loan usually comes with repayment terms that may not be right for everyone: interest-only payment for the initial 5-10 years, followed by both interest and principal payment. Furthermore, while interest rates are lower, approval can take up to a month or longer.
  • Bridge Loan – This is a temporary short loan that is used only during the gap between real estate transactions. In other words, you can purchase a house you intend to flip without having to sell another property first. Interest rates are usually mid-range, but it’s worth pointing out that this type of loan often results in the investor having to pay two mortgages at once. And while the loan period is shorter, approval time may still take a bit longer than a hard money loan.

Which Loan is Right for Me?

The right kind of fix and flip loan for you will depend on a few different factors, namely your personal experience in flipping houses, the amount of time you have and the type of property. For example, those who need to close extremely quickly may benefit from a bridge loan, while those who need longer terms may look to a HELOC loan.

Nevertheless, hard money loans will be the right way to go for many due to this type of loan’s lenient requirements and fast approval / fund delivery. If you already have your project planned out and need financial assistance fast, this will likely be the best choice for you.

Are you ready to learn more about how a fix and flip loan can get your project underway? Contact the experts at Barrett Financial Group today!

Understanding Hard Money Lending in Arizona

Most people are well familiar with the traditional types of bank lending many individuals use to finance purchases like homes and vehicles. However, when you’re interested in real estate investing, there are other options you should explore. In Arizona, hard money lending is a viable option to help you more easily purchase the properties you want to use as either rental properties or to renovate and flip for a profit. Regardless of what type of real estate investing you’re interested in getting involved in, it’s essential to have a firm understanding of what hard money lending is and how it can benefit you.

What Is Hard Money Lending?

Traditional loans often require extensive credit checks and income verifications in order to be approved for the loan. This is where hard money loans are different. These loans are typically asset based and simply require you to have a valid property to put down as collateral. Hard money loans are most often obtained from individual investors or companies that specialize in this type of lending, rather than more traditional banking institutions. This means they aren’t likely to complete any of the income verifications and credit checks typically used to determine loan eligibility. Instead, they will look at the property you are interested in buying and put money up to fund the project as an investment. You are able to get the funds more quickly than traditional bank loans, but it’s essential to remember hard money loans are used for a shorter time, making them ideal for those who purchase properties, fix them up and sell them for a profit. In most situations, they are used to increase the value of the property.

How Do They Work?

When you’re ready to take on one of these real estate projects, you’ll need to put together a proposal that includes current details about the property, such as the purchase price and what type of property it is. This information must be presented to a prospective lender in order to let them see what they are investing in. However, it’s not just about the current state of the property. They will also want to know what types of improvements will be made, how much those will cost and a projection of the increase in value. This can help them decide whether your project is worth the investment. Rather than being concerned about your financial ability to pay back the loan through credit checks and income verification, they are far more interested in the value of the property and what kind of turnaround it will see. Because of the way these hard money loans are set up, if you fail to pay back the loan in the agreed upon timeframe, they are able to seize the property and sell it themselves to regain the money they’ve lost. This is why a collateral-based hard money loan can be beneficial to all involved without worrying about credit and income guidelines usually used to determine loan eligibility.

It’s important to note hard money loans typically only last between a few months and three years, giving you enough time to improve a property and sell it for a profit. Because the timeframe is so short, you can also expect higher interest rates, ranging between 10 and 18 percent. While this may seem like a disadvantage, the potential in this real estate investment opportunity far outweighs the interest rates.

Do You Need a Real Estate License to Flip Houses in Arizona?

The hit TV house flipping shows make it look so easy. You’ve probably thought to yourself; I can do that. However, don’t be fooled; flipping houses and making a profit doing it is not as easy as they make it seem on TV. That’s why it’s important to know as much about the business before going into it. For example, you’re probably wondering if you need a real estate license to flip houses in Arizona. Technically, no. There is no legal necessity for you to take the realtor exam before you can flip a house.

However, with that said, it is important to consider either teaming up with a realtor who has flipping experience or just going ahead and getting the license yourself. Why? Because, as we mentioned, house flipping isn’t as easy as it seems and you’ll want as much knowledge and as many skills behind you before you take a hammer to the wall, especially if you plan on doing this full-time.

How is Success Measured When Flipping Houses?

You won’t get rich overnight flipping houses. In fact, a flipper considers a flip a success when they get a 10 to 15 percent gross profit margin. Make a mistake that costs thousands and watch those numbers shrink. Make another costly mistake and you might not even see a profit. That’s why it’s recommended to do it right by getting a real estate license before going in.

Benefits of Getting Your Real Estate License to Flip Houses in Arizona

It really only makes sense to get your real estate license if you plan on doing this as a career. Otherwise, if you plan to flip a house or two and then move on to something else, there’s no need. However, if this is your new, chosen career, here are some benefits of getting a real estate license that ends in success.

No Agent Commissions

Without your own real estate license, you’ll have to pay a real estate agent commissions on the sale of the property, which can be anywhere from 5 to 6 percent.

You’ll Have a Better Understanding

There’s a lot to know about flipping houses, like getting permits, understanding disclosures, housing discrimination, and more. This can all get confusing to someone who doesn’t know the real estate business. However, when you get your license, you’ll have all this knowledge tucked away inside your brain ready and waiting for you to use at a moment’s notice.

Get Access to the Multiple Listing Service (MLS)

In order to have direct access to the MLS, you need to be a registered real estate agent in Arizona. You’ll want access to the MLS to find houses to flip in a competitive market. The hardest part of flipping a house is not the actual work done, it’s finding the right property to flip. When you have access to the MLS, you can set up notifications that alert you when a new, hot property is up for sale. This gives you an advantage in the market.

Networking

As a working real estate agent who flips houses, you’re going to meet all kinds of people in this business, like contractors and other professionals. The more you people you meet and the more houses you flip will build your network and you’ll start getting word-of-mouth opportunities across your path.

Buyer Trust

When it comes time to sell your flipped property, buyers will put more trust in you when they know you have a real estate license. The majority of Americans prefer to use a real estate agent to purchase a home than go it alone.

How to Get Your Real Estate License

States follow the same basic process for obtaining a real estate license, which includes ensuring your eligibility (age and citizenship requirements), taking the pre-licensing course, passing the state licensing exam, and then activating your license, which costs between $200 and $400. You will also have to pay for access to the MLS on an annual basis. In Arizona, this is about $225.00 per year.