Buy, Rent, and Sell: How to Profit by Investing in Residential Real Estate

Table of Contents

Preface xi
Getting Started
Toddy's Real Estate Opportunities 3
A Continuing Housing Shortage 5
Inflation 8
Cheap Financing 14
A Strong, but Not Too Strong, Economy 16
Plan for Success 16
Hold It or Flip It? 17
Should I Hold Properties for a Very Long Term? 18
Should I Keep My Day Job? 19
How Do I Cash Out? 20
Can Anyone Do It? 20
What Kind of Properties Should I Look For? 21
Where Are the Alligators? 22
What If I Can Flip It? 23
How Can I Flip in a Cold Market? 24
When Is It Not Really Flipping? 24
So Should I Hold It or Flip It? 25
Buying
Eleven Steps to Finding Good Properties in Any Market 29
Buy Close to Home 30
Don't Pay Market Price 31
Buy Single-Family Residential Homes (to Start) 32
Look in Better (but Not the Best) Neighborhoods 35
Always Look First for Flippable Properties 35
Look Where Tenant Markets Are Strongest 36
Buy Properties with Positive Cash Flow 37
Look for Low-Expense Properties 39
Insist on Favorable Terms 41
Always Lowball the Seller 42
Start by Converting your Own Home to a Rental 43
Identifying Breakout Bargains 45
Los Angeles: A Case Study 45
Finding the Turnaround Area 47
Getting the Seller to Work for You 51
Reasons That Motivate a Seller 52
Discovering Why a Seller Wants to Make a Move 52
Motivated Sellers in Foreclosure 55
Getting the Bargain 55
Making Lowball Offers That Stick 57
The Initial Lowball Offer 58
Knowing What the Home's True Market Value Is 59
Deciding How Much to Lowball 59
Maintaining Your Objectivity 62
Deciding How Much of Your Own Money to Put into the Purchase 63
Keeping Your Personal Financing Separate from Your Business Financing 64
Holding Back Some Cash in Reserve 65
The Bottom Line 66
Sweet Deals in Foreclosures 67
Buying Directly from a Seller in Preforeclosure 68
Buying from a Lender at a Foreclosure Auction 78
Buying from a Lender in the REO Market 79
Buying from Government Agencies 94
Buying at Auctions 103
Commodities Auctions 104
Real Property Auctions 106
Where's the Profit? 109
Auction Terms and Conditions 110
Working the Fixer-Uppers 114
Where Can I Find Good Fixer-Uppers? 115
Should I Offer Less? 119
How Much Should I Fix? 121
Will Financing Be a Problem? 122
When Should I Sell and for How Much? 123
Financing for Investors 125
Points: The Bane of Borrowers 126
Qualifying for an Investment Mortgage 127
Buying to Move In and Then Converting 130
Financing for a Flipped Property 131
Building a Bridge Loan 132
Institutional Financing 132
Seller Financing 133
Renting
It's Harder...and Easier...Than You Think 145
It's Business, Not Personal 146
A Typical Progression into Landlording 148
Valuating Property for Rental Potential 153
Location Tripled 153
How Do I Determine the Local Market? 154
How Do I Know If the House Will Make a Good Rental? 155
How Do I Know If the House Is in Rental Condition? 160
How Do I Judge the Direction of the Economy? 161
The Basic Rules for Being a Successful Landlord 163
Offer a Clean Rental 163
Pay the Water Bill 165
Know the People You're Renting To 166
Don't Try to Avoid Children or Pets 169
Don't Try to Get the Last Month's Rent 170
Rent for Less 173
Charge for a Late Payment 174
Don't Delay Fixing a Problem 175
Keep a Lookout on Your Property 176
Don't Let the Tenant Get Behind 176
Evict Only as a Last Resort 178
Raising Rents to Increase the Positive Cash Flow 180
How Much, Exactly, Is My Negative Cash Flow? 181
Can I Cut Expenses? 185
Can I Raise Rents? 187
Can I Deduct Losses from My Rental Income? 189
Getting Professional Advice 190
Preparing a Rental for Sale 191
How Do I Break the Lease? 192
What If the Tenant Simply Refuses to Leave? 193
Should I Fix Up the Property? 193
How Much Should I Spend and How Much Should I Upgrade? 195
Can I Get a Second Opinion? 195
How Do I Estimate What It Will Cost to Fix Up the Property? 196
Should I List with an Agent or Sell It Myself? 197
How Do I Find a Good Agent? 197
How Do I Sell It Myself? 198
Once I Find a Buyer, How Do I Handle Disclosures and Inspections? 201
How Do I Close the Deal? 202
Selling
Getting Your Price in Any Market 205
Making the Property Ready to Show 206
Pricing to Market 207
Getting to the Right Price 208
Getting Enough Exposure 209
The Bottom Line 211
Ready-Made Buyers 212
How Do I Find a Tenant-Buyer? 213
What Is a Delayed Purchase? 213
Where Will I Find a Delayed-Purchase Buyer? 214
Should I Use a Lease-Option? 215
Does a Lease-Option Have Risks? 218
How Do I Qualify a Tenant-Buyer? 220
Are There Additional Advantages to Using a Lease-Option? 221
Are There Additional Disadvantages to Using a Lease-Option? 221
What If I Change My Mind? 222
How to Flip Properties 223
Flipping a Property Using a Real Estate Option to Buy 223
Flipping a Property Using an Assignment 226
Using a Hidden Double Escrow: The Wrong Way to Flip a Property 232
The Right Way to Flip a Property 232
Mortgage, Appraisal, and Rebuyer Manipulation 233
Converting Equity to Cash 234
Refinancing to Buy 235
The Tax Consequences of Converting Equity to Cash 238
The Refinancing Process 240
The Bottom Line 243
Tax Advantages for the Real Estate Investor 244
Is Depreciation an Expense? 245
Does Depreciation Contribute to Loss? 246
So When I Sell, I Could Owe Some Capital Gains Taxes? 253
Is There Any Legal Way to Avoid Owing Taxes on My Profits? 254
What Type of Records Do I Need to Keep? 257
What If I Refinance? 258
Index 259