That’s what Mike Rose, an Atlanta-based loan officer with Wells Fargo, and I were discussing on my radio show recently.
Rose had recently assisted a customer who bought a $50,000 house (he needed only a $40,000 mortgage), but was able to rent it out for more than $800 per month. After expenses, the real estate investor was going to clear about 8 months’ worth of income each year.
“And from that level,” Rose pointed out, “his property price can only go up.”
I’ve been writing about great real estate deals that are available around the country. What can you buy for $3,000? In some places, not much more than a shack on a piece of land in a so-so neighborhood. But in other communities that are awash with foreclosures, $3,000 can buy a decent house in a pretty good neighborhood.
I’m not suggesting you can buy a dozen homes in your neighborhood priced at $3,000 each. For you, the magic number might be $75,000 or $35,000, or $150,000. But if you start doing your homework, you, too, can identify amazing foreclosure and short sale opportunities in your own back yard.
To get started, put together your dream team:
- Real estate agent/broker. Find a great real estate agent or broker who understands short sales and foreclosures and who has ties to local real estate owned (REO) departments at local lenders. The agent will be your eyes and ears on the ground, looking for deals for her more motivated clients.
- Lender. While you may be able to buy your first property for cash, at some point you’re going to want to borrow some funds, especially at today’s near record low interest rates. Find someone who is willing, like Rose, to lend less than $100,000 (there are some fixed costs that make small loans just as expensive and time-consuming as large loans, but far less profitable), and who will work with you to close quickly on the amazing deals you find.
- Inspector. You’ll want to have a professional home inspector on your team who is knowledgeable about properties in your area. If you’re looking for an amazing commercial real estate deal, find a commercial inspector who can help. Remember, it isn’t an amazing deal if you have to spend a pile of cash you didn’t plan on just to make the place habitable.
- Real estate attorney. Although attorneys are not used in many states to close deals, you should hire one to represent your interests when it comes to purchasing a foreclosure or a short sale. Why? Because inconvenient things like federal tax liens can pop up at the eleventh hour, delaying or tanking a sale. It would be nice to know about these potential minefields more than an hour before closing.
- Tax team. Whether you use an accountant or enrolled agent, you should think about how buying a piece of investment real estate will affect future tax returns. The issue of taxes can profoundly affect what you do with your property – including how much you pay for it. And if you plan to buy and flip investment properties, think about finding a qualified 1031 Exchange company to assist you.
The most important thing you can do is get your real estate dream team together so they can get to know you – and each other – better. That way, your team is working toward the same goal.
So, fire up the grill and throw some drinks in the cooler. And start working toward your own next amazing real estate investment.