Real estate investing in Miami real estate is now becoming popular again as there are many properties in foreclosure, short sale, bank reo’s, and government foreclosures. With such an overwhelming inventory of homes available for sale a real estate investor must be able to determine which one to purchase. Investors must follow six steps in order to learn, understand and achieve Miami real estate investment success.
These are the six L steps to Miami real estate investing:
1. Location – Location, location, location is still the key of buying Miami real estate. Buying Miami real estate just because the price is low in a declining area is big mistake that should be avoided. Look for homes in an excellent location like, good schools, economic stable and growing neighborhoods, near shopping centers and malls, near bus stops and metro rails, near hospitals and restaurants. Sometimes it is better to pay a little more for a property in a good location than getting a bargain in a place where it is very hard to sell or rent the asset. Location is often overlooked in purchasing real estate as many investor think they can overcome a bad location if the price is low enough. Out of two homes that are exactly the same, the one in the best location will command a much higher sales price and rental income. Location is the number consideration when purchasing Miami South Florida real estate.
2. Long Term – Real estate investing is a long term proposition. Don’t think you are going to be a millionaire over night. It takes years of hard work and dedication in order to succeed. Hold any property at least one year before selling it. Capital gain taxes will be greatly reduced. Consider renting the property for at two or three years. The rental income generated will help you to properly repair and renovate the property. Many investors purchased properties in the middle of real estate boom with no money down and no equity. These investors were thinking of flipping the homes fast and make a killing in the process. Many homes now in foreclosure are due to investors that were caught in the middle and now realize that real estate investing is very hard to time. Long term Miami real estate investing is the secret to a successful real estate career.
3. Lease Option – Never rent a property with a lease option to buy. Either sell or rent it straight out. A lease option usually is a disaster for both buyers and sellers. The tenant will demand a large discount of the rent to go towards the down payment and closing costs. The problem is that tenant will not buy the property at the end of the lease and the landlord/seller will have wasted a lot of money in rebates given to the tenant/buyer. Demand a 20% or 30% deposit from the tenant/buyer and a clause in the contract that if they default on the purchase they will lose the deposit. This technique will force the tenant/buyer to purchase the property or lose the deposit. The risk of losing the deposit will eliminate the tenant from taking advantage of the landlord by walking out of the contract after receiving a monthly rental discount.
4. Local – Buy real estate close to where you live. Don’t buy real estate in another state or in another country. Keep real estate investing local. Buy in your own county and in your city. The more you know about the area where you are buying the better the decision will be. The investor should always be close to the investment property. The Miami real estate investor should inspect the property often to determine any repair, roof and other problems. The landlord must inspect the property every month when collecting the rent. Check for the number of tenants actually living in the property, check for damages and destruction of the property and overall condition of the place. The investor/landlord will not be able to inspect and determine the condition of the property if it is located far away. Keeping real estate local is an essential step in real estate investing.
5. Leverage – Most real estate books and seminars tell you to use other people’s money when purchasing real estate. This technique is not the best and buyers should try to buy the property in cash if at all possible. Buying a house in cash will help you get a better deal and allow you to negotiate from a position of strength. A cash buyer will always have the upper hand in negotiating with banks, property owners, and other sellers. Cash buyers will not suffer and go into foreclosure if the market turns and they are unable to sell or rent the house right away. Like Dave Ramsey always says “cash is king and debt is dumb”. Buying an investment property in cash is an excellent way to avoid Miami real estate investment mistakes.
6. Learn – Research the property and learn everything about it before you buy. A mistake in Miami real estate investing can be very costly. Usually you make your money when you buy not when you sell. Buying the property at the wrong price the wrong place and at the wrong time could be detrimental. One mistake could wipe you out and put you out of business before you start. Ask questions to the experts, real estate agents, appraisers, mortgage brokers, and other real estate investors. Learn, research, educate yourself in all aspects of real estate investing before you purchase the asset.
It is definitely a buyers market in Miami-Dade County. Miami real estate investors have more choices than ever before when it comes to real estate investing. Investors must follow the L steps, the 6 steps real estate investor guide to successful real estate investing in order to achieve their investment goals in the Miami real estate market.
Every now and then persons trying to make up their minds where to put their money ask me if real estate ventures are more or less profitable, compared to other businesses opportunities around.
My response is always that apart from its potential for yielding significant profits, investing in real estate often confers long terms benefits.
I discuss five such advantages below:
1. You Can Refurbish (to Enhance the Value of) Real Estate
After you buy a stock, you hold it for a period of time and hopefully sell it for a profit. The success of the stock depends on company management and their corporate success, which is out of your control.
Unlike other conventional investment instruments, like stocks, for instance, whose rate of returns, depend on third parties (e.g. company management), real estate investments are directly under your control.
Even though you will not be able to control changes that may occur in demographic and economic aspects, or impact of nature induced changes, there are many other aspects that you can control, to boost the returns on your investment in it.
Examples include aspects relating to adding repairs, or improvements/enhancements to the physical property and tenants you allow to live in it.
If you do it right, the value of your investment will grow, resulting in increased wealth for you.
2. Real Estate Investing, When Done Right, is Proven to be Profitable Even During a Recession (like the one we’re in right now)
It has on several occasions, been used to effect a bail out, from financial setbacks, such as those that many have experienced during the economic downturn happening in Nigeria today.
A considerable number of clients have confided in me that due to the present economic situation, they are not sure of profitable channels to invest their money. Some of them are done with bonds and treasury bills, but are in dire need of a new investment.
We had extensive discussions, and based on my expertise as a real estate consultant, I recommended landed property investment, as the most suitable and secure alternative channel of investment.
This is because, even if all businesses crumble, land will always appreciate greatly. Then to drive my point home, I ended by sharing the following apt quote, by a former American president:
“Real estate can’t be lost, nor carried away, managed with reasonable care, it’s about the safest investment in the world” – Franklin Roosevelt.
Not surprisingly, the client chose to take my advice – and signed up: it was the obvious, common sense thing to do!
3. Real Estate Investments Are Immune to Inflation
In other words, investing your money in ownership of viable real estate can protect you from the harsh effects that inflation usually has on other conventional investments.
This is because the value of real estate generally tends to rise in positive correlation with inflationary pressures. This is why property values and rental rates go up with rising inflation.
The nature of real estate, therefore affords owners the unique advantage of being able to adjust the rates they offer, to match inflation.
Monthly rents for example can be raised to compensate for inflation – thus providing a cushion effect against inflation induced losses that other monetary investments suffer.
4. Real Estate is Uniquely for Being Universally Acceptable as Collateral, Towards Securing Funding from Banks
Today, real estate in form of either building or lands, with proper titles (i.e. Certificate of Occupancy – aka “C of O”) is the most recognized and accepted form of collateral in Nigeria – and some other parts of the world.
It has the unique feature of being able to protect the interests of both the borrower and the bank (that’s doing the lending), so that funds can be released i.e. after due verification, and terms and conditions are agreed.
This is one of the key advantages a private C of O has over the global C of O, because the former (i.e. private C of O) is what will be needed by the intending borrower, in the event of any future financial dealings with bank in Nigeria.
5. Real Estate Investing Allows Use of Other People’s Money
In other words, you can do it even if you do not have enough money. You just need to know how.
This is possible because real estate is physical property or what is called a hard asset. That is an attribute that makes it attractive to financiers i.e. people with money to invest.
This is why many times real estate products are bought with debt – unlike conventional investment products like stocks which are NOT tangible, and therefore perceived as being more risky to invest in.
So real estate investment can be done using cash or mortgage financing. In the latter case, payments can be so arranged to allow payment of low initial sums, provided by you or a willing third party.
Those payments will be happening on landed property which will continue increasing in value throughout the duration of such payments – and indeed beyond. That further inspires confidence in the minds of those financing the acquisition, that their investment is safe.
On a sunny afternoon in Florida, an energetic crowd gathers on the lawn of a high end luxury estate. A loud and eager banter between an auctioneer, a group of bidders and bidder assistants fills the air. For several minutes the auctioneer asks for the next highest bid and the bidders respond. Suddenly the bidders grow silent. The high bidder holds his breath in anticipation of winning the auction. The auctioneer calls for one more bid. In a loud clear voice which rolls over the audience he says, “Fair warning, last chance” the auctioneer pauses, “SOLD!” And in less than 10 minutes another multimillion dollar estate has changed owners.
Successful real estate auctions like the one above are happening all over North America and the Caribbean. Recently real estate auctions have been on the rise, the increase in popularity is partly driven by growing inventories and fading buyer confidence. Properties that were selling in weeks using traditional methods are now languishing on the market unable to attract buyers even as seller’s lower prices. Many say the real estate boom is over but savvy buyers and sellers are profiting from real estate auctions.
Real Estate Auctions Work in Up or Down Markets.
Regardless of trends or market cycles, real estate auctions provide an open and transparent process for buyers and sellers. Properly conducted real estate auctions attract ready and willing buyers and motivate them to act now.
The auction method removes the “wait and see” attitude which serves to further depress real estate values. Buyers are always concerned about overpaying. Buyers gain confidence with their purchases at real estate auctions because they can see what others are willing to pay.
When market demand is high and inventories low, real estate auctions can deliver selling prices well above what a willing seller would have accepted in a negotiated private treaty sale. In good selling climates many property owners using traditional real estate methods; negotiating with one buyer at a time, leave thousands of dollars of equity on the table. During up markets real estate auctions are the best way to establish top market price.
Evaluating Your Real Estate for Auction
Not every property or seller for that matter makes a good candidate for auction. First of all sellers must be ready to sell now and for the current market value. Also a real estate auction will not fix problems caused by a downturn in market value of your property, if you owe more than a willing buyer will pay, be prepared to come to closing with your check book.
Properties that do well in real estate auctions have a high uniqueness factor. Ask your self, “What makes my property different from most others?” Maybe you own a resort property or high end luxury home, commercial properties and land do very well at auction. Real estate auctions thrive on uniqueness. If your property is like everyone else’s, the best thing you can do is offer the most competitive price.
Most importantly sellers must be reasonable about setting a minimum bid. A seller must look at the lowest, most current comps and price below that to generate the interest and urgency necessary for a successful real estate auction. Once the auction begins and qualified bidders start competing against one another you can watch the selling price increase.
Locate a Qualified Real Estate Auctioneer
Start by checking with the National Auctioneers Association, the best real estate auctioneers belong to this organization. These real estate auctioneers are well trained and adhere to a standard of practice and a code of ethics. Many attend the annual International Auctioneers Conference where the latest techniques and innovations in the real estate auction industry are presented.
Find out if the company you are interviewing is a full time real estate auction firm. Many real estate agents are getting auction licenses yet have no experience with the auction method of marketing. Conducting a successful real estate auction is nothing like (private treaty) traditional real estate sales. Go with a real estate auction pro.
You’re probably better of with an auction house that specializes in real estate auctions. There are many qualified auctioneers who have generations of experience selling personal property; furniture, dishes, lawn equipment and the occasional rare painting. Selling real estate at auction is a complex matter that should only be attempted by full time experienced real estate auction professionals.
Commissions and fees may vary, sellers must pay all marketing expenses up front and buyers typically pay 10% of the sales price to the auctioneer of which a share goes to participating real estate agents.
Every time I talk to someone about my business and career, it always comes up that “they’ve thought about getting into real estate” or know someone who has.
With so many people thinking about getting into real estate, and getting into real estate – why aren’t there more successful Realtors in the world? Well, there’s only so much business to go around, so there can only be so many Real Estate Agents in the world. I feel, however, that the inherent nature of the business, and how different it is from traditional careers, makes it difficult for the average person to successfully make the transition into the Real Estate Business. As a Broker, I see many new agents make their way into my office – for an interview, and sometimes to begin their careers. New Real Estate Agents bring a lot of great qualities to the table – lots of energy and ambition – but they also make a lot of common mistakes. Here are the 7 top mistakes rookie Real Estate Agents Make.
1) No Business Plan or Business Strategy
So many new agents put all their emphasis on which Real Estate Brokerage they will join when their shiny new license comes in the mail. Why? Because most new Real Estate Agents have never been in business for themselves – they’ve only worked as employees. They, mistakenly, believe that getting into the Real Estate business is “getting a new job.” What they’re missing is that they’re about to go into business for themselves. If you’ve ever opened the doors to ANY business, you know that one of the key ingredients is your business plan. Your business plan helps you define where you’re going, how you’re getting there, and what it’s going to take for you to make your real estate business a success. .
2) Not Using the Best Possible Closing Team
They say the greatest businesspeople surround themselves with people that are smarter than themselves. It takes a pretty big team to close a transaction – Buyer’s Agent, Listing Agent, Lender, Insurance Agent, Title Officer, Inspector, Appraiser, and sometimes more! As a Real Estate Agent, you are in the position to refer your client to whoever you choose, and you should make sure that anyone you refer in will be an asset to the transaction, not someone who will bring you more headache. And the closing team you refer in, or “put your name to,” are there to make you shine! When they perform well, you get to take part of the credit because you referred them into the transaction.
The deadliest duo out there is the New Real Estate Agent & New Mortgage Broker. They get together and decide that, through their combined marketing efforts, they can take over the world! They’re both focusing on the right part of their business – marketing – but they’re doing each other no favors by choosing to give each other business. If you refer in a bad insurance agent, it might cause a minor hiccup in the transaction – you make a simple phone call and a new agent can bind the property in less than an hour. However, because it typically takes at least two weeks to close a loan, if you use an inexperienced lender, the result can be disastrous! You may find yourself in a position of “begging for a contract extension,” or worse, being denied a contract extension.
3) Not Arming Themselves with the Necessary Tools
Getting started as a Real Estate Agent is expensive. In Texas, the license alone is an investment that will cost between $700 and $900 (not taking into account the amount of time you’ll invest.) However, you’ll run into even more expenses when you go to arm yourself with the necessary tools of the trade. And don’t fool yourself – they are necessary – because your competitors are definitely using every tool to help THEM.
A) MLS Access is probably the most expensive necessity you’re going to run into. Joining your local (and state & national, by default) Board of Realtors will allow you to pay for MLS access, and in Austin, Texas, will run around $1000. However, don’t skimp in this area. Getting MLS access is one of the most important things you can do. It’s what differentiates us from your average salesman – we don’t sell homes, we present any of the homes that we have available. With MLS Access, you will have 99% of the homes for sale in your area available to present to your clients.
B) Mobile Phone w/ a Beefy Plan – These days, everyone has a cell phone. But not everyone has a plan that will facilitate the level of use that Real Estate Agents need. Plan on getting at least 2000 minutes per month. You want, and need, to be available to your clients 24/7 – not just nights and weekends.
4) Lack of Proper Funding
If you’ve taken the time to create your business plan, than you should definitely have your budget, but I can’t stress enough the importance of having and following your budget. However, the budget alone doesn’t address the important aspect of funding. 90% of all small businesses fail due to lack of funding. Typically, new agents will want to have 3 months of reserves in savings before taking the leap into full time agency. However, money in the bank isn’t the only way to answer the question of funding. Maybe your partner can support you for a certain period of time. You can keep a part-time job that won’t interfere with your business as a Real Estate Agent. Many successful waiters make the transition to successful real estate agents with no money in the bank. When you start your new business, don’t expect to earn any income for, at the least, 60 days.
5) Refusing to Spend Money on Marketing
Most new Real Estate Agents don’t realize that the hardest part of the business is finding the business. Furthermore, they’ve just shelled out around $2000 for their license and board dues, so the LAST thing they want to do is to spend more money! Again, the problem lies in the lack of understanding that you’ve just jumped into the Real Estate Business, you haven’t taken a new job. And any good businessperson will tell you that how much business you GET is directly correlative to how much you SPEND on marketing. If you choose the right brokerage, then you will get some good inbound leads. However, don’t neglect a good, personal marketing campaign from the beginning to get your own name out as the Real Estate Agent to go to.
6) Not Focusing Their Marketing Efforts in the Most Effective Areas
One reason why many new Real Estate Agents who do begin spending money on personal marketing stop is because they spend it in the wrong place. The easiest place, and where conventional Real Estate tells you to spend your money, is in conventional print marketing – the newspaper, real estate magazines, etc… This is the most visible place to see real estate advertising, it’s where large offices spend a good part of their money, and so many new agents mistakenly spend their money here. This becomes very frustrating to new agents because of its low return. Large brokerages can afford to spend their money here because they’re filling two needs – they’re marketing their own properties for sale while creating new buyer traffic for their buyer’s agents. New Real Estate Agents should look to their own sphere of influence and referral marketing to see the most effective return on their investment. An agent can spend as little as $100/month marketing to their family, friends, and colleagues and see an incredible return. There are many great referral systems around that all focus on the same premise – that if you consistently market yourself to your sphere of influence as the Real Estate Agent to go to – then you will get more business. The key is to pick a system and to follow that system. You will see results.
7) Choosing the Wrong Brokerage for the Wrong Reasons
New Real Estate Agents choose their new broker for a variety of reasons – they have a good reputation, they offer the most competitive split, the office is close to their house, etc… While these alone aren’t bad reasons to choose a broker, they aren’t going to do a lot to help you in your success. The #1 reason to choose a broker, and the question to ask is, “What do you offer your new agents.” If the answer is, “The most competitive split in town” you should definitely keep looking. Remember, 100% of $0 is still $0. If you’re leaning towards the largest broker in town, who has a great reputation, remember this: You’re starting a BUSINESS not a JOB. While it might be fantastic to brag to your friends about landing a job at a prestigious company, it’s no accomplishment to hang your license on the same wall in the same office as other successful agents.