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Q: What Are The Challenges Of Buying Property Outside Of Your Own State Or Area?
A: Investing in locations other than your immediate vicinity can bring up questions and issues to deal with in addition to the regular concerns. Some of them are the following:
- Distance: How do I close, maintain & manage my unit?
- Closing: Some people think that they have to close in the location where you make the purchase. This is not true! If you select a lender that is licensed appropriately, you can close in your own home town or even close by mail. Your Realtor can usually recommend one or more lenders that are licensed in all 50 states to accommodate you. In our electronic age all of these fine details have been simplified to go quickly and smoothly wherever you are.
- Maintaining: If you don’t live in the same location as your investment and needs repair or maintenance, how do you find and hire someone to do the work? The easiest and cheapest option is to make investments with onsite management already. But for any type of investment in any location there are companies who will manage your property for a fee. The fee is typically based on how much or little you want them to do. Then the fee will typically range from 6% on up, depending on the level of service selected.
- Management: having good management on site already in place is an excellent advantage when your property is not located near you. If you are selecting your own management company make sure to interview several or choose one with a good reputation and history already.
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Q: What Types Of Investments Are Best?
A: The two factors that make investment property valuable are:
1. The cash flow they produce and
2. The appreciation they produce
There is often a balance reached between these two factors based on immediate versus long term goals. We typically teach people to “buy and hold”. Whether your property is cash flowing or not, it will typically appreciate much better than most any stocks, bonds or mutual funds could ever do.
Choose your focus and choose your investments accordingly. Have your realtor or representative examine these factors for any investment you purchase. Ask them for their experienced and educated opinion.
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Q: What Is Typically Involved In Beginning Real Estate Investing?
A: Buying an investment property is no more or less complicated than buying your own home.
The process is basically the same:
1. Pre-qualify: your offer is a much stronger one if the seller knows your financing is ready to go.
2. Choose your investment: use the help of your team of experts to advise you, when needed.
3. Make an offer: if you are purchasing in a development, pricing may be pre-determined. But if you are purchasing a single family home, for example, there is some room to bargain. Don’t “low-ball”. Sellers may be insulted and not look at any other offer from you, just based on that.
4. Purchase Agreement: This is just a fancy name for the contract you and the seller will sign, listing out the specific agreements. Here are some common elements:
- $ amount of deposit/earnest money
- Specifically states you’re the price & terms of the agreement Proposed financing you have chosen (this is why it’s good to pre-qualify)
- Rescission period – the amount of time you have to change your mind for any reason. This is different from state to state and varies on the type of investment property you purchase. For example, for a condo or town home in Minnesota, you have 10 days from the date you receive your "Condo Docs" to withdraw and get your earnest money back. After that, the seller may keep your earnest money.
- State the intended closing time that you and the seller agree upon.
5. Closing: On this date you will finalize your purchase and officially “take title” to the property. At this time, the balance of your arranged down payment will be due. For example you and your lender agree that putting 10% down is the best option for you and you put 2% down for your earnest money already, you will need to bring a cashiers check for the additional 8% to closing. Your lender will give you the exact amount plus any closing costs you are paying for upfront.
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Q: Once I Purchase A Place, How Do I Go About Getting It Rented?
A: There are actually a lot of facets to that question. If you’d like my free eBook, "The Investor's Guide To Renting" - which answers this question at length and in detail - click HERE.
The short answer is get it ready, get it listed in good local advertising, get a good lease to use in your state and follow up with every inquiry.
Q: What Is The Difference Between Investing In State Versus Investing Outside Of Your Home State?
A: The main difference between markets is that some are appreciating better and some are cash flowing better. Some can have both qualities or even neither. This is exactly why it’s so important to know what your focus is on and aim for that. If you have a well-educated and experienced Realtor on your side, you’ll be able to target your market quickly and easily. Keep in mind with the out-of-state investments you will want either on-site management or have knowledge of a reputable and successful management team in that area to use.
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Q: How Much Will I Need To Come Up With To Start Out?
A: Typically there is a no risk, refundable deposit to hold your investment. The rescission period will determine exactly how long that period is. Then the actual down payment is typically 5% to 20% and is usually very straightforward as chosen by you and your lender. If you want to start out with a $150,000 property for example, plan on at least $7,500 down as a good place to start.
Q: Why Invest in Real Estate Now?
A: Baby Boomers are just at the leading edge of beginning to retire. Appreciation in popular retirement destinations will typically be favorable. Check with a trusted Realtor for area specifics. Also, there are still very attractive mortgage products available with rates still at an unusual low, allowing you to qualify for more property that the historical average.
Also lenders have more flexible guidelines to get you approved. Also, the population is still growing. With interest rates no longer sinking, many people who would otherwise buy are now back in the area “rental pool”.
Lastly, our significant aging population puts a significant amount of seniors back into the rental pool, as they often no longer want to care for a house and yard but still have the disposable income from their retirement plans.
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Q: Why Alex?
A: I have been trusted as a Real Estate representative for hundreds of people. Simply look at my testimonials to hear what my clients have to say. Any that have left their info, you may contact to ask what their experience has been working with me. I have a reputation of the highest level of service available.
Also, I never requires the Exclusive Right to Represent you as so many other Realtors do, so you many choose to buy from whomever you like at any time. My goal is to help you build your wealth through investing in real estate and have you fulfill on your legacy by offering you only the best investment opportunities available.
Q: What Is A 1031 Tax Exchange And How Can It Help Me?
A: IRC Section 1031 provides that neither gain nor loss is recognized if property held for investment or productive use in a trade or business is exchanged for property held for investment or productive use in a trade or business. What that means is when you are ready to sell an investment property, you can use the gain on it to re-invest in “like kind” property(s) without being taxed on the gain if you use a qualified intermediary and follow the 1031 rules.
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Q: What Is The Difference Between Being Rich And Being Wealthy?
A: There are several ways to look at it. We’ve chosen one of the more popular definitions: The rich are defined by their jobs. They earn a lot and often spend a lot on their lifestyle. If they lose their job, they soon lose their riches.
Financial wealth can considered as not related to a job. It is wealth that produces a combination of appreciation and cash flow no matter what type of job you hold, if any. Building wealth, therefore is about gathering un-earned income. We teach property ownership as one of the methods of long term wealth building.
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Q: How Do I Build Wealth?
A: Everyone has their own individual strategy. We’ve chosen to model people who have already produced millions and will work forward with you to individualize a plan that will work best for you. We first look at what your current balance sheet looks like, then how to optimize it to build your wealth. The truly wealthy are conscious players in the game of building wealth and at the source of their own success.
Q: Should I Invest In Single Family Homes Or Condos?
A: YES! We focus on single family homes for the following reasons:
1. Liquidity: personal residences are quick and easy to sell, if needed
2. Higher grade of tenant: more stable, less vagrant, higher quality
3. Equity gain over time: long-term appreciation is typically the greatest
4. Easiest to acquire financing for
5. Easiest to rent out
6. No association or management fees = increased cash flow
And we focus on condominiums regionally for the following reasons:
1. Liquidity: personal residences are quick and easy to sell, if needed
2. Lowest price points: easiest to acquire for beginners or multiple units for intermediate investors
3. Easiest to acquire financing for
4. Lowest down payment requirements = less cash out of pocket
5. Strong rental market for affordable prices = high occupancy rates
6. Onsite management & association = least personal time invested
If you are considering diversifying your investment portfolio, you may want to consider both of these options. It is a great way to balance cash flow with appreciation.
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Q: Will I Have Enough Income To Retire Comfortably?
A: Only your financial planner or wealth coach can examine that with you. Consider asking yourself what the likelihood is of your current job providing the needed income to become financially independent. You may be surprised to learn how little your current retirement plan actually provides you for retirement income.
Fewer than 1 person in a thousand receive the expected level of income at retirement. Unfortunately a good income often lures people into a false sense of security, causing the lack of preparedness for retirement funding. As a result the average age of people retiring continues to climb.
Q: Where Do I Get The Money To Invest?
A: There are many choices and you will want to consult a wealth building coach to guide you, and help you make the most appropriate decision for your lifestyle. Initial consultations are free, and they’ll have financial products available for you to choose from. Some possible areas to consider taking a loan against or liquidating if deemed appropriate: 401K, IRA, 1031 Exchange (existing real estate), short term investments (stocks, bonds), or your home equity (which I highly recommend using under the right circumstance).
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Q: Which Loan Products Are Right For Me?
A: This is another great question for your personal wealth coach and/or lender to examine what is right for you. Consider some of the following: fixed, arms, interest only, option arms, down payment, or zero down. |
