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Residential Investment Property – Is it Really Worth the Effort?

This article is the beginning of a series of articles focussing on investing in residential real estate.

The title of this article poses a very good question. My definitive response is YES. There are so many valid reasons you should consider residential real estate as a vehicle for building wealth, some of which are described below:

Reason 1: Generally speaking property is a stable investment. It does not experience the volatility that for example, the share market does. In fact, well researched residential property very rarely drops in value . . . it may plateau BUT normally does not drop in value.

Reason 2: Everyone is involved in the property market. In one way or another, each and every one of us is involved in residential property – either as a property owner OR tenant. This creates significant demand.

Reason 3: Banks and other financial institutions are happy to lend money using property as security. From the point of view of a bank, there is nothing like bricks and mortar as security for lending.
Reason 4  Tax benefits help pay expenses. In affect, this assists with buying an investment property. Such benefits include tax deductions for relevant expenses such as rates, interest, repairs, property management, and depreciation.

Reason 5: You can add value and achieve immediate capital gain. There are many ways to add value to property. One of my favourites is to focus on cosmetic changes. In other words, concentrate on minor expenditure items such as a new coat of paint, new door handles, new cupboard doors in the kitchen, new light fittings, etc.

Reason 6: Rental income will eventually more than cover associated expenses. I recommend holding property for the long-term. In my experience, and this depends on the circumstances of each individual property, it takes approximately 4 to 5 years for a negatively geared property to become positively geared. Once that happens, not only is the property not costing you anything, it is actually putting cash in your pocket.

Reason 7: Property ownership is relatively familiar to most folks. This makes the purchase of residential property a much easier option to get right.

Reason 8: Generally on average, real estate doubles in value every 7 to 10 years. This becomes an enforced method of saving AND when the rent increases sufficiently, it can put money in your pocket.

Reason 9: You do not need to earn a fortune to invest in residential real estate. Many property investors earn less than $40,000 per year. It is not necessarily how much you earn that counts, rather it is what you do with what you earn.

These 9 reasons only scratch the surface. In my opinion there are literally hundreds of reasons to consider residential real estate as your primary investment tool. Let’s face it, unless history changes, well chosen property will result in increased wealth.

We could keep going, however hopefully I have convinced you to at the very least, consider residential real estate as a serious option as your wealth building vehicle.

A mistake when purchasing residential property can be both expensive and long-term. If you are not an experienced property investor I strongly suggest you either gain sufficient knowledge through self-education OR short-cut the process and hire professional Buyers Agents.

Property Manager Education About Carbon Monoxide Detectors Is Critical

Carbon monoxide (CO) is an odorless, invisible gas produced when any fuel such as natural gas, kerosene, wood, oil or even common barbecue charcoal is burned. At high levels without proper ventilation carbon monoxide can kill humans in a very short period of time, even after just a few minutes. Moreover, there is credible research that acute exposure or poisoning by CO can cause chronic health effects such as lethargy, severe headaches, amnesia, psychosis, concentration problems, memory impairment, personality alterations, and even Parkinson’s disease. The American Medical Association states that CO is the primary cause of accidental poisoning deaths in the United States year after year. The federal Centers for Disease Control estimates that CO poisoning kills approximately 500 people annually and causes another approximately 20,000 injuries per year. Needless to say CO is a very important topic and issue for property managers to understand and embrace in order to act as professionally as possible and to protect their client’s best interests.

Today there are laws requiring listed and labeled CO detectors within all residences, rental units, investment properties, multi-family residences, and apartment buildings. It is tantamount for property managers and property management companies to be fully educated about CO, CO detectors, CO poisoning, exposure and prevention. There are also some ‘best practices’ guidelines for property managers to be mindful of and incorporate into their property inspection checklists.

Various State Laws Require Carbon Monoxide Detectors in Dwellings

In California as of July 2011 the Carbon Monoxide Poisoning Prevention Act of 2010, (hereinafter “The Act”) requires carbon monoxide detectors to be installed within every dwelling unit intended for human occupancy. The Act also requires CO detectors to be installed in ‘all other existing dwelling units’ on or before January 1, 2013. Thus, as of 2014 “ALL” dwelling units need to be equipped with properly listed and labeled CO detectors.

How are CO Detectors Energized

The standards for manufacture of CO detectors are well documented in state laws. Standard 720 of the National Fire Protection Association is the basis for manufactured detectors. Most home improvement and hardware stores carry several code complying varieties of detectors. CO detectors can be battery powered, can be plug-in (outlet) with battery backup, or can be hardwired with battery backup. CO detectors that are manufactured with a combination smoke detector must emit an alarm or voice warning with each signal different than the other.

Where in a Dwelling Unit are CO Detectors Required?

CO detectors are required to be installed in a manner consistent with building code standards for new construction. For minimum effectiveness and security CO detectors should be located outside of each sleeping room or in the vicinity of bedrooms. CO detectors must also be installed in every level of a dwelling unit including basements within which fuel-burning appliances exist and dwelling units that have attached garages. The CO detectors should be at least six (6″) inches from exterior walls; three (3′) feet from HVAC supply or return ducting vents, and not obstructed by other equipment, furniture, or occupant belongings.

Landlords and Property Managers are required to Supply Carbon Monoxide Detectors in All Dwelling Units

The standards and requirements for CO detectors apply equally to landlords and property managers. After proper notice has been granted to a tenant property managers have the authority to enter dwelling to install, repair, test and maintain CO detectors. CO detectors are required to be operable at the time the tenant takes possession of the unit. Tenants are required to notify the property manager if the CO detector becomes defective or inoperable. A property manager will not be held responsible or in violation of the law if a tenant has failed to notify the property manager of the deficient device.

Common Sources of Carbon Monoxide in Dwelling Units

Any fuel burning appliance located in a residence or dwelling unit is a potential CO producer. Gas burning heating systems, gas burning cooking appliances like cooktops, ovens, griddles, and water heaters are all possible sources of CO. Typically, the gas burning appliance somehow becomes mal-adjusted and begins to burn the fuel incompletely, leaving CO molecule production. This is sometimes caused by the equipment failing, but can also be caused by alterations in the dwelling unit interior atmospheric pressures.

Another common source of CO in a dwelling unit is from attached garages and vehicular exhaust. It is always a best practice to start a vehicle in an attached garage and move it to the driveway exterior while allowing it to warm up. Never allow vehicles to be running within a closed garage as the exhaust will most certainly find its way into the dwelling potentially causing problems.

Property Managers Must Take Carbon Monoxide Education Seriously

Because CO is a silent killer it is imperative that property managers be diligent about CO detector education and maintenance. Carbon monoxide is such an extremely important area of concern for property managers for the reasons stated above. In addition to protecting your client’s best interests diligence in maintaining properly functioning CO detectors can save lives.

Property managers and property management companies must be adequately educated about CO, CO detectors, CO poisoning, exposure and prevention.

The Joy of Wholesaling and Flipping Houses

The Wholesaling technique usually excites new real estate investors because it’s a niche strategy that can produce quick payoffs for people that are just getting started in the field of flipping houses.

The thing that I love best about this technique is that it offers a level playing field for everyone with or without experience. A newcomer or even a seasoned investor can start using this strategy to getting paid quickly without the need for credit, cash, lenders, contractors, a 401-k, an LLC or very much else.

Real estate wholesaling or flipping houses for cash is when you act as the middle man between a motivated seller, looking to unload their property ahead of imminent foreclosure or divorce perhaps, and a motivated buyer looking to take over the payments on a property they expect to quickly rise in value or one that they expect to perform the repairs on that will force the value. You make money by charging a fair amount, an “Assignment Fee” on every sale. You move the property quickly, often transferring the property from motivated seller to motivated buyer at closing. Of course, there are few things you should consider before setting out on what could be a very lucrative career.

Envision Your Successful Wholesaling Business and Personal Life First

Get cozy with your hopes and dreams because they are of you and they matter to nobody else like they matter to you. The mind is a powerful thing and when that mind meets with the law of attraction….much can be granted and achieved.

I remember how it happened to me. I went to my first real estate training seminar and left there like a newbie on steroids with absolutely no place to go… but my mind was buzzing with everything that I’d learned over that 3 day boot camp. My head felt like it was literally stretching and expanding… I was growing. In retrospect, I now know that it was because of this growth that I couldn’t get all of this new knowledge to quiet down or even allow me to get sleep without dreaming about “running the numbers” and I was also seeing all sorts of houses in my sleep. Most importantly- I saw myself happy and prosperous in my newly chosen field. My passion for real estate investing drove my conscious and unconscious thoughts and I was determined to see it through. So, I’m a true believer that before you do anything, you have to “see it” first. See it in your minds’ eye, see it in your dreams and then hold it in your heart. We all have hopes and dreams that extend beyond the money making aspect of having a profit producing wholesale business…right?

Remember to see yourself doing those things also… whatever they happen to be. But do not stop there. You have been educated, you’re empowered and at this point… you must execute.

Make a Plan – This is your business, not your part-time hobby

Benjamin Franklin said, “Failing to plan is planning to fail” and this is especially true in the real estate wholesaling business too. And, I say business because that is what it is, a money making venture where you expect to receive financial rewards for the time and effort you apply. It might start out as something you do in your part-time, but that doesn’t mean it always will be. So, you must start by setting goals and establishing objectives to reach those goals. Things might change as your experience grows and you learn new methods to locate, buy and quickly sell properties for a profit, but having a good plan from the outset will keep you focused on the short-term.

Allow Wholesaling to become your life: Make It Real

If you really want to make money in real estate and in particular, wholesaling properties, you have to make it real… make it part of your life. The best athletes train hard, the best musicians practice relentlessly and the most successful real estate investors always work and study to get better. This means reading books, newsletters and websites; listening to tapes and CDs; and watching DVDs that can help you transition from your 9 to 5 job confidently. Become obsessed, especially at the outset, with learning everything you can about how to wholesale real estate properties and mastering the business.

Find your market

Do a little research and select a 2-3 good neighborhoods or a part of town that you know offers the best potential for making a good profit and work it, work it, work it. These would be the areas with a minimal number of days on the market because they are in sought after locations.

Target your market

Choose your promotional materials, your advertising medium to target your farm area. Are you going to be using signs, direct mail, vehicle magnets, website submission forms, flyers or perhaps a huge billboard or local grocery cart with your name and the benefits outlined all over the seat flap? Many investors, especially in today/s market will have to test different materials because what may have worked in the past, may not be a good use of advertising dollars in today’s market, it’s different time. You’ll have to explore what your sellers respond to and then saturate them with it.

Market, market, market… oh and did I say market?!

Find motivated sellers

The one thing above all that can set you apart from all the other people out there is looking to make some extra money by wholesaling / flipping properties is the ability to locate undervalued property and negotiate a great price with the owner. This takes a little leg work and often the development of research skills if you really want to look for deals that other people in the business overlook or don’t want to really expend the effort. Motivated sellers are out there, though, and once you know how to find them you will be well on your way to watching your wholesale profits explode.

Find motivated buyers

Another critical component to completing any deal in real estate wholesaling/ flipping houses is creating a list or file of people who want to buy undervalued real estate to either fix and flip or want to add to their rental portfolio to create an income stream. These are often builders, contractors or people who are already renting property throughout your chosen area. Get to know their buying habits, the type of property they like to “flip” or rent out. The stronger your list, the easier your task and the faster you’ll get paid through your wholesaling your real estate deals. In my course, I teach my students 3 valuable ways to make sure that they’re not adding tire-kickers to their list.

Flipping The Deal

Now its time to sell your sweet 5-6 figure wholesale deals for cash money! It’s easier than you think. We have developed an amazing 90 Days To Cash e-course which explains how to build a great database of Performing Buyers and also how to sell properties on the retail market to end buyers.

Wholesaling is a great way for people without a lot of cash flow to begin taking advantage of the tremendous profits to be made in real estate. If you think real estate wholesaling is for you, take the time to develop the plan and learn as much about the business as you can before starting out. To get more info on finding the BEST deals check out 90 Days To Cash Wholesaling Houses.

If you like what you’re hearing about wholesaling / flipping real estate because you now realize deep down that it can help you create a bigger, bolder life than you now own… then you cannot waste another day. Once you really, really take it as a spirit (because it is) that this business is out there, in today’s market conditions where you can undoubtedly find a property today and wholesale it tomorrow for thousands of dollars…you have no choice but to do Whatever It Takes To Make That Happen… not later but Now.

Wholesaling Gets You Paid Now and I Guarantee That You Will Absolutely Love It!