Real Estate Investment Strategies | Strategies for Investor

Strategies for Residential Home Investors
by Frank Nunez

Today’s Real Estate market is entirely different from the market of several years ago. Home prices in the Tampa Bay area have dropped significantly within the past few years. It’s due to this drop in home prices that serious as well as first time investors are coming out in droves to take advantage of declining home prices. However, investors like everyone else want a good deal. But what many investors don’t realize is that home prices have already gone down by about 40% in the Tampa Bay Area. What cost five hundred thousand a few years ago cost less then half now. Right of the bat you are getting a good deal on a property.

As far as investment properties go, what is highly in demand by investors are your sub-one hundred properties. These are properties that are listed below hundred thousand. These properties for the most part are short sale or REO properties. Short Sales generally take 60- 90 days or longer to close. It could be a long drawn out transaction that can be frustrating for all the parties involved. Then you have you’re bank owned or REO properties that generally take much shorter amount of time to close which is usually 30- 45 days since. Which kind of property you want to invest in is entirely up to you. But as far as distressed properties are concerned, they require not only patience but a set of strategies to follow that will ensure you success in purchasing investment properties.

Strategies:

Put in a competitive offer- Home prices have already dropped to record lows. The listing price already reflects that. If you’re serious about obtaining the property, you want to put in an offer that is closest to the listing price as possible for several reasons. For distressed properties, the banks have already lost a considerable amount of money on the property. Putting a low ball offer will not only get the offer rejected but the bank will most likely not even counter. As for regular listings, the owner is most likely up side down on his mortgage. Going considerably lower then the listing price will not even be worth submitting since at that point the seller might as well put up his house as a short sell. More importantly, listings are subject to multiple offers, the more competitive your offer is, the better chance you’ll have of getting your offer accepted over other bids.

Be patient- This is a buyer’s market, that doesn’t mean that the buyer makes all the rules. If your offer is accepted, expect to wait at least 30-45 days or longer, especially with distressed property. Short sales take 3 months or longer to close. Bank owned properties can close within 30-45 days, but every bank is different. If you’re paying with cash, then you could close sooner.

Cash is King- If you’re paying with cash, then you are a very powerful person in this market. Between financing or cash, the seller or bank would accept cash any day. When putting in a cash offer, make sure you supply proof of funds i.e. a bank statement showing available funds.

Weigh in Closing Costs- If you ask for the seller to pay for closing cost, you have to give him something in return. Rule of thumb is listing price plus closing costs in your offer if you are looking for the seller to pay all of closing costs. Again every seller is different, but requesting closing costs to be paid for already weakens your position. So you need to give something in return to better your chances. As for distressed properties, some banks will pay closing costs, some won’t. It all depends how much the property is listed at. However it is negotiable.

Sold as is- When purchasing a property, especially distressed properties, most of them will be sold as is. Meaning that the property will be sold in it’s current condition and the seller will not update or fix any structural issues if requested that may come up in the home inspection. Keep this in mind when tracking how much you want to spend on repairs.

Home inspection a must- If and when your offer is accepted, it is vital that you complete a home and termite inspection. A Home inspection will reveal any structural or cosmetic issues. The inspection also gives you an opportunity to back out of the contract if you find the inspection unsatisfactory.

Min $1,000 escrow deposit- Many banks require a minimum escrow deposit when submitting an offer, usually a $1,000 or more. The escrow deposit will be deposited with title and will go towards closing costs, taxes, insurance etc. If you don’t want to have your money held up in title waiting for an acceptance, you can request in the contract that the escrow deposit be put with title within 48 hours of acceptance.

Contracts, Contracts, Contract- When submitting an offer, make sure your agent conveys everything in the contract. If there are certain appliances not included in the purchase, make sure the agent conveys that in the contract in order to protect your interests. There are situations where both parties will sign the contract and the listing agent will pull a fast one on you. Have your agent enforce the contract.