Whether shopping for a new home, business location, or investment property there are several strategies you can do to find incredible deals. Here’s how:
1. Know your market. Whether in a big city, or a small rural community, doing your homework on political, economic, and demographic trends is a good way to spot up and coming areas.
You want to have the opportunity to buy low, and sell high, and being part of the first wave of redevelopment (or development) of an up and coming area is a great way to get a deal. Business journals, newspapers, and local planning or economic development authorities are just a few examples of where you can access this information.
The US Census online (www.census.gov) has a large supply of datasets to help you understand markets. They even have searches to help you find out census tract or block of the property, so that you can get itemized information on homeownership rates, average incomes, and average household size. For commercial investors, you can see what industries are hot by looking at zip code industry breakdowns by sector.
When in doubt, your local library (and librarian) should be able to help you narrow your search. You might also consider doing some window-shopping with a real estate agent, who upon request can give you information on comparable sales to help determine average prices of property.
2. Don’t go for the obvious. Many novices will either look for the perfect place or the other extreme: a fixer upper. The perfect property comes at a premium. And buyers beware, the fixer upper probably will to (on the backend).
Instead, try looking at unique or less popular types of properties. Is everyone pining for a Victorian home? Why not look at the seldom-desired Ranch style. An inexpensive, creative face-lift can transform the Ranch house into a more modern Craftsman.
Is the ideal business location in your town on the main drag? Why not look for opportunities in a nearby neighborhood. You might also consider purchasing a larger space than you need, and then subletting a portion of it. By thinking outside of what’s trendy, you should be able to find some great deals.
3. Look for other deals or incentives that will help pencil your bottom line.
Historic properties are often eligible for grants or tax abatement. Likewise, many cities have programs to help businesses locate. When in doubt, call the local government and ask for some direction. The US Department of Housing and Urban Development also offers many programs to assist with home repair and first time homebuyer assistance.
The EPA also offers funds to help remediation of brownfield sites, a popular redevelopment strategy for many urban infill projects. Tax credit strategies also offer a commodity that might entice investors.
4. Foreclosures. This is the standard route most real estate investors take to maximize their profits.
Best to get in at the pre-foreclosure level when you can negotiate directly with the owner, and not have to wait for it to go to auction. The added benefit? It takes the guilt out of profiting off of someone else’s misfortune, because you are potentially rescuing them from bankruptcy, foreclosure, and credit ruin.
There are several websites available, for a fee, which can help you find foreclosures in your area. Better yet, look with the US Department Housing and Urban Development (www.hud.gov) foreclosures or other programs to help you (for free). HUD’s website also lists other agencies and organizations that sell homes (including the IRS).
5. Network. The best way to be in the know, is know the people who are already know.
Joining clubs, visiting hearings, and talking to other real estate investors and industry folks is one of the most painless ways of learning about potential deals. Teaming up with others also helps to divide and conquer the sometimes-messy process of real estate development.
6. Negotiate. Many first time investors take the sticker price at
face value.
In a buyers market, you have the upper hand. Whether you talk down the asking price, or ask for additional terms, negotiation can help you make a potentially risky deal a no-brainer.
7. Be knowledgeable on the math. Don’t trust the lender to help you figure out how to profit.
By understanding mortgage mathematics and mortgage structures you can uncover an alternative to traditional flipping. Rentals can provide a steady income while the sellers market is sluggish, and also provide a springboard for other investments.
In most cases, the best deals are to be had when using a variety of these techniques.