Five Real Estate Investing Tips
There are always new things to learn about real estate. Hopefully one or more of the following real estate investing tips will teach you something new and useful. 1. Time Your Sale For Tax Savings W...
There are always new things to learn about real estate. Hopefully one or more of the following real estate investing tips will teach you something new and useful.
1. Time Your Sale For Tax Savings
We once had a December closing on a property that we had owned for a few months. By pushing the closing up to the first week of January, we were able to put off paying tax on the gain for a year. If you have a property to sell that will result in a taxable gain, you might also want to hold off the sale if it is near the end of the year. Consider also in which year you are likely to be in a higher tax bracket. If the tax will be substantially more in the following year it is better to close now and pay less.
2. Use Home Equity For Investing
Whatever people say about zero-down investing (and yes it is possible), it is easier and often more profitable to invest in real estate when you have some cash to work with. Short on cash for investing? You can borrow against your home if you have a good chunk of equity. An even safer way - if you are serious about investing - is to downsize to a smaller home to free up that equity. That way you get money to invest without having larger payments on your own home.
3. Check For Code Violations
Check for any code violations or problems before you buy (or put a contingency in the purchase agreement). Once, while looking at a property, we learned that in order to keep using a property as a triplex, we would have to provide two parking spaces for each unit. That just happened to be the rule in that particular community, and there were only three spots total at the time. Problems like this don't have to be deal-breakers, but you need to know what the costs of bringing a property into compliance will be before you make an offer, or adjust your offer before you close the deal.
4. Crucial Clauses Your Offer Needs
If you are buying through a real estate agent they will most likely provide a purchase agreement for you to make your offer with. These normally cover the important points, but be sure you have the few truly important clauses in the contract. These include a financing contingency (unless you are paying cash) specifying that the offer is only valid if you can obtain a loan (and specify the terms you need on the loan). There should be a clause that gives you the right to an inspection and to renegotiate or cancel the contract if the results are not satisfactory. There should also be a "liquidated damages" clause (common in many pre-prepared contracts now), which says that if the deal falls through because of some fault of yours, the seller only gets to keep the good faith deposit. If there are other obvious issues, like junk that needs to be removed, be sure to address these in the offer as well.
5. Learn A Few Negotiation Techniques
This is one of the more important of these real estate investing tips, because your profit is often determined by how you buy a property. You might use the "limited authority" ploy, for example, to get a lower price when negotiating directly with a seller. This involves hesitating and saying something like, "Well, I would have to check with my wife to go any higher than this." Hopefully the seller then imagines the wife saying no to the whole deal, and so agrees to what you are offering. There are dozens of great techniques used by master negotiators, but even learning and using just a few can boost your profits.
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ABOUT THE AUTHOR
Copyright Steve Gillman. To see a photo of the house we bought for $17,500, get a free ebook on how to buy Cheap Homes, and a free real estate investing course, visit: http://www.housesunderfiftythousand.com/