It’s easy to get lost in all the numbers when you are looking at a major real estate investment.  Simply follow a basic plan when calculating your discounts to find out how much money you are willing to invest in a property.

Property investment is a numbers business.  As a real estate investor you’ll need to pay close attention to your numbers when purchasing a property in order to make money.  Every investor develops their own basic plan for purchasing property to make a profit. 

Those just starting out can get confused with all the suggested rates of return that you need to aim for, but each property purchase needs its own specific discount for you to make a good profit. 

Start with the Minimum
A basic plan is to start by taking 10% off the asking price or the mortgage of a property you are working with the homeowner to purchase.  This can be called your profits or your basic earnings.

From there you’ll continue to lower the amount of money you are willing to pay for that property based on certain negative factors associated with the home.  This can be fact that the property doesn’t have a basement or it needs a new roof.  You can negotiate a discount for many different problem areas with the bank.  Just calculate the costs of these repairs or how much less a buyer would be willing to pay for it and you’ll get the additional discount you need to ask for on the sale price of this property.

Examples of negative issues associated with a property;

• Disrepair; needs new roof, new heater, etc.
• No appliances or old appliances
• No basement
• Only one bathroom for multi-bedroom house
• Economically depressed area
• Lot of other properties for sale around the home
• General shabby look, needs lawn care, new paint job, etc.

When you finish the calculations on discounts you’ll ask for, you’ll have your minimum discount, your additional discount and your total discount.  That determines what you’ll be willing to pay for a property.  As long as you approach the seller or the bank with proof of these negative issues, you stand a good chance of getting your discounted price.

This method of calculating will allow you to remain true to your financial plan for real estate investing, and also not end up getting into trouble by paying too much for a property. 

You can make money real estate investing in a high-priced area.  All it takes is a little more effort and a willingness to hold onto property until it appreciates.

A lot of people are interested in real estate investment, but they also live out west in very expensive areas.  These are places where the average family style ranch may cost up to half a million dollars and the cost of living is very high.  The tendency for these potential real estate investors is to say; sure this works for people in cheaper areas of the country but the market here is so expensive it’s just not worth our while. 

It is very possible to make a return on your real estate investments out west and a good profit.  Even though the prices are higher, the process of property investment is still all about the numbers. 

You may have to work a little harder to find those properties at a price that matches what you’ll need to pay in order to make a return.  You may even spend more time in short sales and note purchase discussions with the banks to pick up properties that have little or no equity built up in them.  Yet, it is more than possible to make a profitable return on your investments.

What Rate of Return Should You Look For?
Since the properties out west have been known to sell for outrageous prices you may even be able to get yourself a very big return every once in a while.  However, there’s nothing wrong with a basic 10 to 15% rate of return on your real estate investments out west either.  Just add a couple of zeros to the numbers when you estimate how much money with which you’ll be working, since prices are a little bit higher.

Also when you work on real estate investments in places like California, you may wish to consider taking a minimum discount of only 5%.  The properties out here tend to appreciate in leaps and bounds.  Even if you are only taking the 5% rate of return on a property deal, you’ll still end up making more of a return in appreciation of your property.

It is possible to make a profit in the more expensive properties in a higher priced market.  You may have to take less of a return on each deal, but if you hold onto the properties for a little while they tend to appreciate in high cost areas and you’ll make more profit on the resale of that property.

Property investing sounds like a great idea because you can make large returns on your money.  However, you can make the same profits with less effort when you buy mortgage notes instead.

Everyone thinks that buying mortgages is some complicated process reserved for the professional property investors that have been in the business for some 30 odd years.  However, the process of buying a mortgage note is easy and a great way to make profits.  You have the chance to get a great return on your investment without involving yourself in a lot of maintenance and effort with the bank. 

The great thing with owning mortgage notes is that you have all of the security of the real estate because if the homeowner doesn’t pay you, you can still foreclose and take the house back.  So, you’ll just end up back in the real estate game with that particular piece of property, but at least you got some payments on the property over the years.  On the other hand, as long as the homeowner pays you as agreed you don’t lift a finger, you just take the money to the bank. 

This is because when you own the mortgage note, you essentially become the bank.  Do you think the bank cares whether the homeowner keeps up the property they’ve mortgaged?  No, all they worry about is getting their monthly payments. 

As a mortgage note investor you don’t have to deal with The Three T’s.

• Tenants
• Termites
• Trash

When you become the bank, you’ll have a lot more free time.  It’s much easier to be the bank, than to be the property manager or the property owner trying to sell. 

It Takes Forever to Get My Profits!
True, you are waiting for monthly payments on the property and this may be the clincher for some property investors.  Rather than a lump sum profit you must wait for your profits over the term of the mortgage, which can be decades. 

However, if you’ve got the money to invest in several mortgage notes you’ll be able to live well and still make those profits on the monthly income you receive.

Most people worry about getting a mortgage.  They never bother with the process of creating a mortgage or what’s in it for the banks.  When you buy your first mortgage note you’ll become the bank and see why it’s good to be a mortgage note investor.

There is more than one way to invest in the real estate market.  Now you can tap into a little known section of the industry using short sales to purchase properties with little or no equity and still make a profit!

You know that it’s possible to buy a house that has little or no equity in it for less than is owed on the mortgage!  Yes, it’s possible.  Let’s say that you, as a property investor come across this homeowner who is behind in their mortgage with the bank.  On the current real estate market the defaulted property is worth $100,000, but the homeowner is actually in debt for $115,000.  It is possible for you to get that homeowner’s house for just $70,000.

This seems impossible, but a little known practice called, “Short Sales” in defaulted note buying allows you to purchase property that is over financed and has little or no equity in it!   This is basically when you work with the bank to renegotiate the selling price of the house and the bank writes off the remainder of the mortgage. 

Getting Started with the Short Sale
When you work with this homeowner, you will become the homeowner’s advocate or intermediary with the bank.  So the first thing you’ll need to do is get an “Authorization to Release Information”, and fax it to the bank so that you can negotiate with the bank.  This basically means that the homeowner is giving the bank permission to speak with you concerning their mortgage.

When you contact the bank you’ll want to explain to the bank the reasons why they should be willing to let go of the house for less than it is valued and for less than is owed on the mortgage.  This involves putting together a little package with information that the bank may request from you and extra information that you include on the condition of the house.

For example; the house may need a new roof.  There could be all kinds of deferred maintenance and it needs all kinds of repairs.  You could even point out that the housing market is declining in the area or point out that there are loads of other houses on the same street that haven’t sold.  Basically, you present your case to the bank explaining the reasons that they should let the property go cheap.  Be sure to include digital photos of the damage to the property or the decline.

Using the Short Sales technique it is possible for you to work with the bank to reduce the selling price of that defaulted property.  You are able to purchase it from the homeowner for a reduced price and the homeowner can get out from under this mortgage without it being on their credit. 

All you need to do is approach the banks professionally, put together a good case for reducing the price (such as needed repairs to the property) and for good measure include some digital photos of damage or neglect on and around the property.

Despite all the information you may see and hear to the contrary there are times and locations when it comes to real estate investing that aren’t primed for profit. Study these things before taking the plunge and understand that a declining market or a blighted area quite often do not bring in the profits the gurus would suggest.

There are countless gurus of late night television that will tell you that when it comes to real estate there is never a bad time or a bad location to invest. As much as it pains me to be disagreeable, I must take this moment to do just that. When it comes to real estate there are all kinds of ups and downs and hiccups in the market. You will find that some cities go boom while others go bust and there are a few that never recover. If there is any doubt, take a car ride through the ghost towns of the gold rush. Those were definitely properties that weren’t solid investments when all was said and done.

Today, one must be more careful than ever when it comes to investing in real estate. It is prime pickings for foreclosures and bargains when it comes to locating properties in which to invest. The problem is deciding what you are going to do with those properties once they sell and getting it done. Flipping in a declining market for housing, and today’s market in many cities large and small across the country is a declining market, is not recommended. With the increased number of people losing their homes to foreclosure, higher standards for financing, and other problems associated with the literal collapse of the sub-prime lending infrastructure the number of people available to purchase these flips is drying up at an alarming rate.

If you are investing in rental properties at the moment your business is probably booming in most cities throughout the country. Particularly those that are large enough to be affected by the sudden housing shortage as it relates to rental properties that was created when so many homes went into foreclosure. The people who have lost their homes now need a place to live. Many of these can benefit not only from rental units that you may own but also units that you are willing to allow a lease option on. This gives those who feel hopeless a little shot of hope to have back a slice of their dreams of home ownership that may have gone astray. Of course, there are some of us who feel that it is never a bad time to invest in rental properties but there are bad locations and this is something else that should be considered when planning and purchasing properties as part of your real estate investment portfolio.

The important thing to remember is that it is not always a good time or a great location for a real estate investment. The difference between those who are successful investors and those who are successful at selling books and DVDs is sometimes as simple as understanding when and where to invest.