West DFW REI Group

Fort Worth's Premier Real Estate Investment Education Group


Getting Started in Real Estate Investing

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Diversity of Real Estate Investing

7 Feb 2021
Real Estate Investment | Longhorn Investments

If you own your home, your home equity may be your biggest asset. However, few people would consider home equity to be an investment asset because it does not produce income. Rather, its value comes as collateral on a home equity loan, home equity line of credit, or mortgage and it can only be monetized by selling the home. To generate income from real estate, you need to be involved in real estate investing.

The housing bubble of 2008 disabused investors of the notion that real estate will always appreciate in value. On the contrary, real estate is subject to the same market forces as any other asset. However, real estate has a few attributes that make it uniquely suited to any investment portfolio – land is in limited supply, location determines value, real estate lasts forever, and the property has multiple uses besides investment. Because of the uniqueness of real estate as an asset, real estate investing can be attractive as a side gig or as a full-time job. Here are some considerations for getting started in real estate investing.

Diversity of Real Estate Investing
Reality television programs popularized the idea of house flipping. While house-flipping is a form of real estate investing, it is not the only way to invest in real estate. Rather, real estate investments come in many different forms. Choosing the right one for you depends on many factors including your assets, the time and effort you can devote to real estate investing, and your tolerance for risk.

Multi-unit Residential Real Estate Investing
Multi-unit residential real estate, such as apartment buildings, duplexes, triplexes, and fourplexes, is a popular investment for two primary reasons:

Rental income: Rather than flipping the real estate to realize a one-time profit, income from the rented units provides a steady source of income.

Financing options: Residences with four or fewer units are eligible for home mortgages and FHA loans if you plan to occupy one of the units. If you do not plan to live in your multi-unit residence or the residence has more than four units, financing through small business loans or hard money loans is available.

Fix-and-Flip Real Estate Investing
This can be an involved and risky form of real estate investing. On the other hand, this can also yield some of the greatest returns. Fix-and-flip is exactly what it sounds like – you buy an existing residential building, repair it, and sell it.

The risk of fix-and-flip transactions comes from the investment of time and money into the property above its acquisition cost. For example, if you buy a home and invest $30,000 fixing it up, you must be sure that your renovations will attract a buyer willing to pay at least $30,000 more than you paid for the home so you can pay off your loan and turn a profit.

Securing Financing for Real Estate Investing
After you decide how you want to invest in real estate, you need to find a way to finance your real estate investment. As described briefly above, there are three general categories of financing for real estate investing:

Home mortgage: Home mortgages are widely available for relatively low-interest rates. However, the terms of home mortgages are long and loan requirements are high. Loans are usually available only to borrowers with high credit scores and borrowers with no credit history or poor credit history are excluded. Moreover, home mortgages can take weeks to be approved and funded so they are not always the best option for investors who need quick approval when the right property comes on the market.

Hard money loans: Hard money loans are offered based on the value of the real estate being acquired. Hard money lenders use a metric called the After Repair Value (ARV)which is the future value of the asset after its renovated. Generally, the hard money lender will lend between 60-70% of the After Repair Value. In this way, hard money loans can cover at least all or most of the repair costs since the value used is the after-repair value (ARV). Hard money loans can be approved and funded much more quickly than home mortgages because of the less stringent underwriting guidelines. Terms are much shorter, usually notes that last months rather than years.

Bringing it Together to Get Started in Real Estate Investing
After choosing a strategy for investing, targeting an asset, and securing financing, the hard work begins. You must acquire the asset, fix it if necessary, and flip it. However, by carefully doing the legwork at the beginning, you will be in a much better position of reaching your ultimate goal of making a substantial return on your investment!

For insight into the hard money lending costs associated with real estate investing, contact Ryan Blake

Filed Under: Blog, General, Hard Money
Tagged With: active real estate investor, Dallas hard money lender, hard money loans, investor loans, real estate investor loans
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TREC ONE TO FOUR UPDATES: OPTION MONEY

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Starting February 1, 2021, Texas Real Estate Agents have the option, but not the requirement, to use the new TREC 20-15 1-4 Family Residential Contract (Resale), which contains new provisions for the Title Insurance Agent to receipt and disburse the Option Fee.  This contract form becomes mandatory for use by all Texas Real Estate Agents after April 1, 2021.

Changes from the prior 20-14 form contained in the new 20-15 contract form include –

      Deleting paragraph 23 dealing with the Option Fee, and combining Option Fee provisions into paragraph 5 with the Earnest Money Provisions.

      Both the Option Fee and the Earnest Money are to be delivered to the Title Insurance Agent, referred to as escrow agent in the Contract form.

      The Option Fee and Earnest Money can be delivered in a single check, rather than in separate checks as required previously.

      The new Contract form now provides for a separate receipt of the Option Fee and the Earnest Money, with the receipt of the Option Fee being subtly changed from being signed by Seller’s Broker to require the signature of the escrow agent. Make sure you receipt both.

    Under paragraph 5.A(3), “The amount(s) escrow agent receives under this paragraph shall be
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Must-Know Tax Tips For Real Estate Investors in North Texas

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Must-Know Tax Tips For Real Estate Investors in North Texas

Here are a few must-know tax tips for real estate investors in Dallas Fort Worth. Taxation on income is a given, by making the right moves, you can lessen the impact to your bottom line. Using tax laws to your advantage can maximize the returns that you will realize on your investments. 

Planning

Prior proper planning prevents xxxx poor performance, most especially when it comes to organizing your real estate investment business. As a real estate investor, you will want to seek out a real estate investment experienced Certified Public Accountant (CPA), through recommendations from other investors in the West DFW REI Group if possible. You will want to select a CPA with experience in this sector of the market that can offer guidance and recommendations which places you in a position of optimizing your tax deductions for your real estate holdings in Dallas Fort Worth. You should plan to work closely with your CPA, in order to create a plan that is specific to meeting the needs of your circumstances and business model.

Write-Offs

Every decision you make with your real estate investing business should be done with the consideration of what you can write-off, especially when your goal is to take full advantage of any tax tips for real estate investors in Dallas Fort Worth. Depreciation, the amount of value the property losses due to wear and tear over time, can be deducted as well. There is a specific formula used for residential property and the structure, which is valued over a 27.5 year period, as well as for any fixtures and the appliances for a 15 year period. An experienced CPA can guide you in great detail, basically, any expense associated with the property can be deducted. This includes any interest you may be paying on a mortgage for the property, the expenses of repairs, or even the property taxes.
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Evaluating A Real Estate Investment Deal

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 Evaluating A Real Estate Investment Deal

We talk with lots of people looking to buy real estateinvestment properties in [market_city]and the surrounding areas.  Some of them know what they're doing when it comes to evaluating a real estate investment deal... and some of them are still in the learning process.

But, since our entire business is finding great deals at deep discounts... and often passing those deals onto real estate investors like you... I thought it would be a great idea to share with you some resources to use for evaluating a real estate investment deal.  This works in any market... [market_city], surrounding areas, [state], any other states across the country.

When you really boil it down... evaluating a real estate deal is a pretty simple process.  If you're looking to buy real estate as an investment, wholesale properties, hold them for rent... whatever, one of the most important parts is "buying it right"(i.e. - not overpaying).

So let's dive in.

What Goes Into Evaluating A Real Estate Deal - (for single-family houses)

There are just a few main elements when you're evaluating a deal.

  • Cost of repairs needed to get it back up to good condition
  • The after repair value (ARV) of the property (what it's worth and can sell for today once it's fixed up)
  • If you're going to buy and hold for a rental... you need to know what you can rent it out for and what your "debt service" (mortgage payment) will be.  Knowing this makes sure you're buying so the property cash-flows each month

There are other things you can (and should) look at too... but those 3 are the main important things to look at first.
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Benefits of Joining Your Local REIA

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Benefits of Joining Your Local REIA

REIA is an abbreviation for Real Estate Investing Association / Group.  REIA groups or clubs as some are called is an invaluable tool to meet people from all walks of life who have an interest in real estate investing and to learn all about the REI business.  Members of REIA groups are like-minded groups of men and women “where deals and funding meet”.  Companies have been formed and deals have been made as a direct result of the relationships developed and information shared at REIA group events.  I like to refer to them as your real estate investor “watering hole”.  Members attend the “Watering Hole” to learn, find deals and funding. 

Learn more about the benefits of joining your local REIA group through the Infographic below:


Education - Here's a small list of topics you may see at your local REIA:

+ Getting Started

+ Foreclosures

+ Short Sales
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What Is A Real Estate Virtual Assistant And How Can They Help My Business? Part 1

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What Is A Real Estate Virtual Assistant And How Can They Help My Business?  Part 1

A real estate virtual assistant (REVA)provides assistance in administrative tasks such as paperwork, online marketing, data entry, phone calls, market research, pulling comps, website maintenance and management, etc., specifically trained for real estate professionals.

Real Estate Virtual Assistants work remotely from the comfort of their home or their own office space, working on task you assign to them.

There’s a lot of ads for virtual assistant services online these days, but it is best to remember that they come with many different skill sets and levels, but most of them will have no specific training to support real estate investors.

How Real Estate Virtual Assistants Can Help You?

The short answer is… almost anything that can be done online or with a phone, your REVA can help you with.

While it is true that the role of virtual assistants has grown from secretarial and general administrative services, there are now literally dozens of specializations VA’s advertise service for, market research, scheduling, logistics, legal research, data entry, bookkeeping, social media, internet marketing, web development and programming, web SEO, and much more.
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8 Ways to Tighten Up Your Rehab Process

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8 Ways to Tighten Up Your Rehab Process

June 6, 2016

Like any successful endeavor, when you’re ready to rehab a property, you need a plan. A surefire way to waste valuable time and money is to go into a project helter-skelter—everything needs to be done according to a plan and in the right order. Here are some tips that can help you on your next property renovation.

DUE YOUR DILIGENCE

First things first—walk the property inside and out. Make thorough notes about repairs and upgrades you want to make based on your exit strategy.  Assess the neighborhood where the house is located and choose improvements suited for the area or renter. Over- or under-improving a house can make it harder to find a buyer or tenant. These things should also be part of your budgeting process:

  • Anticipate problems and plan contingencies. All budgets need a plan B.
  • Factor in holding costs, sales commissions, and other expenses that can eat into profitability.
  • Make sure that your after repair value (ARV) or rental rates are properly analyzed.  Local realtors are a resource to assist with ARV estimates and rental comparables.
  • Ask other investors for contractor referrals.  Make appointments with them before closing on the property—remember that good contractors are booked in advance.  Have a detailed plan of your project ready to share to ensure all contractors are on the same page when it comes to deadlines.  Request examples of their work currently in progress.

UNDERSTAND AND WEIGH YOUR CAPITAL OPTIONS
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Common Mistakes Investors Should Avoid

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No two real estate investors are the same.  You may have similar styles & tastes but there is always something about you and your business that makes you start at the same point but where we go from there is completely up to us.

There is no sugarcoating the fact that investing can be difficult at times.  Without the right mindset you can easily get frustrated and swallowed up by the business.  There are several common business traps and pitfalls you need to avoid.  Falling for even one of them can cause your business to get off track, making it difficult to get back on track.  Here are five common investor traps/mistakes you need to be on the lookout for.

  • Short Sided Thinking: Regardless if you invest on a part-time or full-time basis, you can’t expect immediate results.  Entering the world of real estate investing is much like entering any other business.  There will be a period of adjustment and a learning curve you need to deal with.  It is extremely rare to generate revenue in your first 90 days without a little bit of luck involved.  Too many investors expect leads to fall in their laps, and when they don’t they get frustrated with the business and many quite without giving it time.  The reality is that it takes some investors months before they close their first deal.  Even if you enter the business with established contacts, it could be rough going until you get the feel of things.  Simply browsing the MLS or looking at real estate websites doesn’t mean you are committed to the business.  Doing this for 90 days and seeing what happens is not a recipe for success.  You need to commit for six to twelve months of working hard and grinding regardless of the results.  If you can’t commit to that your business will be in trouble.
  • Slow To React:  Investing in real estate happens in real time. In most cases, those investors who react the fastest get a leg up on their competition.  Sellers are not going to wait for you to run your numbers and present an offer.  You must be able to make quick, decisive decisions in short time.  Investors who get into trouble are often slow to change. Real estate markets are constantly fluid.  Something that worked for you even just six months ago may not apply today. If you are relying on outdated and inaccurate trends and data, you will find yourself in trouble.  On the flip side, if you are one step ahead you will get the best price on deals and be able to generate the best leads.  You need to be able to process data as it comes in and know how to decipher it.  If you are slow to react your competition will soar right past you.  You’ve heard the old saying “you can’t steel in slow motion”.  You’re not necessarily stealing but you do have to move quickly or someone else will beat you to the door.
  • Expectations – Realistic or Unrealistic:  There is more real estate investing shows today than ever before. There is a good chance you can find a show for your niche any day of the week, on multiple channels.  While these shows do a great job at providing some of the pitfalls investors face daily, they are often unrealistic with the numbers, both in the repair costs and the profits.  Most new investors don’t have the ability to pay for a $400,000 property with cash.  They don’t have residual capital to cover up the mistakes that can help them generate a higher profit.  The returns you see on TV can happen, but usually with an established investor in the right market.  Don’t think that every deal you are part of will turn into a home run.  These deals are the exception and not the norm.  Trust me on this.
  • Little or No Business Planning: Real estate is one of the few careers where you don’t need a degree or license to enter and be successful.  Literally, anyone can make an offer on a property and own real estate.  However, the best investors are those who map out a plan before they start.  This doesn’t mean you need to write out every move you plan to make for the next twelve months.  It means that you should have an idea of where, when and how you are going to invest.  Even answering the most basic questions will help guide you and streamline the process.  You won’t jump at every new property that becomes available that doesn’t fit you’re your criteria.  This will help not only save time but increase the likelihood that you will get deals you actually want.  Many new investors forget that the goal of real estate is to generate a profit and not simply get an offer accepted.  The more you know about your business and where you want it to go the more successful you will be.
  • No Networking/ Contacts:  Every good business relies on contacts. This is magnified in the world of real estate investing.  Even if you haven’t closed a deal you need to get out there and meet people to start building your power-team and buyers list.  Go to real estate investment club meetings and networking events.  Don’t be intimidated by the fact that you don’t know as much as others in the room.  Everyone started in the same position you are in now at some point.  Stick your hand out, introduce yourself, explain what you do and you're your looking for, and what you have to offer.  Even if you only make one connection in a meeting it is well worth it.  Every meeting you can add someone else to your network and before long you will have a solid list of people you can turn to for help, deal generation or team building.  Without making an effort to network your business won’t be nearly as strong as you need it to be.  Take plenty of business cards and hand them out to everyone you meet and watch your list grow.

There is a fine line between success and disappointment in any business.  As you are just starting out in real estate, beware of these Common Mistakes Investors Should Avoid and increase your chances of success.
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Tasks To Outsource to Virtual Assistant

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  • Tasks Wholesalers Can Outsource to Virtual Assistants

For many new investors, wholesaling real estate is often the first step for a new real estate investor to learn the trade and make some money.  When executed correctly as the middleman, wholesalers can make some quick cash without credit or personal financial risk.

That being said, as market presence builds and more deals sit on the table, some tasks that consume a lot of time pile up.  Outsource these tasks to best manage your time and return on investment.

Tasks To Outsource to Virtual Assistant

1. COMPS/Market Analysis

COMPS or commonly called comparable market analysis (CMA) is a critical piece of a wholesalers job/responsibility that has to be accomplished on every deal you are considering making an offer on.  When done correctly, pulling comps can take a fair amount of time to ensure your SOLD properties are a fair comparison to the home you are evaluating.  With ample training, this is a task that can be delegated to your Virtual Assistant (VA) and can free up your time to do other critical tasks in your business.
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