Archive for the ‘Buying First Investing Property’ Category

Importance of Education

Friday, September 25th, 2009

By Jon Swire

If you have previously purchased your first home or even started looking at income properties, I am sure you remember when it first closed. I certainly do. It was a great feeling to sign those documents and truly own my first property, but many investors also feel unsure of what they are doing in terms of a long-term investment strategy. After all, you don’t know what you don’t know.

The key to success in any business is education and planning. The first step is to learn as much about your subject matter as possible, which will provide you with confidence when doing current and future deals. In this case, it’s learning to use 2-4 unit properties to make successful investments to secure your financial future.

I’m a big believer in education and that’s one of the reasons I teach at UCLA Extension and around the country, training folks on 2-4 unit properties. It is also why I launched my program and have now built the tools that every investor—no matter how experienced—needs to succeed in real estate investing.

I’ve had the opportunity to work with and train thousands of investors and real estate agents over the past few years and the most consistent feedback I hear is that the training they received provided them with the confidence they needed to work with income producing investment property. Remember, knowledge is power and the perfect first step to securing your future is to gain the knowledge so you can make the best investment decisions possible.
In addition to books, DVDs, webinars, and financial models to analyze investments, I also offer one-on-one coaching to help investors effectively sort through their real estate investment opportunities. Click here for more information on this proven real estate investment training program.

Buying Your First Investment Property

Tuesday, April 7th, 2009

By Jon Swire

Are you finally ready to take the plunge and buy your first investment property? Have you finally saved enough money to start investing in real estate, but don’t know where to begin? If so, you’re going to want to read my tips on what to buy and where to start to maximize your investment.

For most first-time investors, the choice is usually between a Single Family Home or a 2-4 unit property, commonly called Duplex’s, Triplex’s and Fourplex’s. There are large differences between both and you should fully understand them before plunking your money down. In this segment we’re going to focus on Single Family Residences or SFR’s for short.

SFR’s provide an investor with the greatest leverage possible, meaning you can put the least money down. It’s not unusual to buy these types of deals with 10% down, meaning on a $150,000 home, you’ll only need to come up with $15,000 plus closing costs. This makes these types of investments very affordable for most young investors who don’t have a lot of capital to begin. Be prepared, however, to feed the alligator every month, because these properties typically don’t debt cover, which means the rent you collect every month probably won’t be enough to cover your mortgage payment, tax bill and any other expenses you have.

Most often these properties are purchased as pure speculation or appreciation plays, meaning the goal is to create equity over time. For example, if you bought a property for $150,000 with 10% down, and were able to resell it in 3 years for $175,000, you’d earn $25,000 on your $15,000 investment, which equates to a 167% ROI over a 3 year hold!

Not bad, but be careful when buying these types of deals, because your goal is to come as to close to breakeven as possible, so you don’t have to come out of pocket. And remember, if you’re tenant moves out for any reason, you won’t have any money that month to cover the mortgage or expenses, so make sure you have 3 months of mortgage payments in reserve for a rainy day.

And remember, the more SFR’s you own, the more tenants and properties you have to manage. It’s easier to own a 10-unit apartment building than 10 SFR’s since you only have 1 roof and 1 lawn to mow, versus 10 roofs and 10 lawns. Finally, as soon as you’re able, take your equity gains from the SFR’s and 1031 into properties with multiple units so you can begin your climb up the Property Ladder.

For more information, tips, and services visit http://www.theresnofreelunchinrealestate.com/

Buying Your First Investment Property – Part II

Tuesday, April 7th, 2009

By Jon Swire

Are you finally ready to take the plunge and buy your first investment property?

In Part I of this segment we discussed the pros and cons of making a Single Family Residence your first investment. Now I’d like to discuss the benefits of 2-4 unit properties, also called Duplex’s, Triplex’s and Fourplex’s.

2-4 Unit properties typically require 10-20% down, providing an investor with the ability to get pretty good leverage and come out of pocket with a smaller down payment compared to traditional multi-family properties consisting of 5 or more units. Remember, your goal is to find a property with a high CAP Rate and low GRM, so you debt cover each month. This means the rental income you collect each month will be enough to cover all expenses (taxes, insurance, utilities, etc.) plus the mortgage.

Like SFR’s, these properties are often purchased as pure speculation or appreciation plays, meaning the goal is to create equity over time. Unlike SFR’s, 2-4 unit properties have a lower Vacancy Loss Risk since there are more units to spread the risk over. So, if one of your tenants vacates, you’ll still have the rent from the remaining units to help pay your mortgage and monthly expenses. Remember, however, that you may still need to come out of pocket, so make sure you have 3 months of mortgage payments in reserve for a rainy day.

2-4 unit properties are a great place for you to cut your teeth and learn the basics of Property Management. They’ll provide you with the opportunity to rent units, negotiate leases and perform routine maintenance. I suggest you hire a local property manager for the first 6-12 months of ownership so you can ride shotgun and learn the basics of management before you completely take the task on yourself.

Like SFR’s, once you’ve built up some equity in these properties, you’ll want to sell them and do a 1031 Exchange into a multi-family property consisting of 5 or more units. 2-4 units are one of the first rungs in the Property Ladder and a great place to begin on your way to building a real estate portfolio that will generate enough passive income for you to retire on.

For more information, tips, and services visit http://www.theresnofreelunchinrealestate.com/