My Very First Real Estate Investing Deal And What You Can Learn From It

Every investment in real estate offers the opportunity to both earn money as well as learn. My first deal was a mix of both. When I decided I wanted to get involved in real estate investment, it took me around eight months before I decided to start my first venture.

The deal was created by my local real estate investor group. An local Memphis investor was able to find a deal on a 3 bedroom two bathroom home in a moderate to lower income region, where people are looking to purchase homes. This was a wholesale purchase for another investor, and he assigned his contract to me to close the deal. I purchased the property for $58,000 and five thousand dollars went to the investor in exchange for signing the contract and $53,000 was paid to the seller of the property. I had enough cash on hand to pay for the entire cost of the deal along with $4,000 for any repairs that needed to be done. The property was valued at around 95k following repairs.

I had decided I wanted to create a rent to own or lease option deal with the property. I placed a sign in my backyard with http://laneefvm612.lowescouponn.com/10-undeniable-reasons-people-hate-house-staging flyers for property. The website's URL included inside images of the property. While I was doing this, a more experienced investor advised me I should consider selling the property to get fast cash and move to the next opportunity. As a novice investor I wasn't sure how long it would take to locate the next fantastic deal. I was looking to maximize the potential of this property. After approximately one month (and about $800 worth of advertisements) I found a tenant that I liked and agreed to pay a $2500 deposit plus $875 per month, and an estimated sale price of $99,000. If the tenant pays the rent before the beginning of the month , the first $100 counts as a payment toward the price of purchase. If I had sold the property fast I would have made $89k, paid a $5k selling fees, and netted $20k and I would have had to pay $7k in taxes. If I opt for the lease option, it can take between 2-6 years for me to be able to sell. It will likely cost me less than $99k and will have lower selling costs. I'll be able to make about $35k which includes $5k in capital gains. While the lease option may provide me with more than just retailing but it also permits me to negotiate more deals. I believe that the $15,000 profit quickly could have been greater than $30,000 in several years. That's not even including what I could have accomplished with the cash I invested in the property.

The tenant I chose not once during the first nine months paid the rent punctually, which means he hasn't earned the $100 monthly rent credit, and has on average needed to pay an additional $100 each month for late charges. Although I am not sure that this tenant will ever refinance, my income and his job status have both improved. The property's present market value is $105k. The father of the tenant is a mortgage broker. He has suggested I let him pay the rent first before evicting the son.

Lease option agreements are wonderful for humane reasons. I feel that I'm helping someone who couldn't rent otherwise. I'll only grant a lease option to one who I believe will improve their credit score and employment situation and should be able buy the house within 24 months. Mortgage brokers can assist you obtain your tenant's refinanced by confirming the 12 months of payments and providing proof of your check.

If the tenant doesn't purchase the property within the first two years, I have the option of renting the property to a different tenant or trying to sell it. I prefer to sell the property and receive a large check for cash so that I can utilize the money for the next purchase.

You can gain some valuable aspects from this experience: The yard sign was given with flyers and links to view photos on a website. We asked that potential buyers visit the website before showing the property's interior. The ads were placed in the most popular local newspaper and received 20 times more calls from the yard signs than we received through the paper. This street has decent traffic, however, other properties I own are more isolated. Use a yard sign or flyer box and upload photos online with concise description. Always emphasize the kitchen and bathrooms. 2. If I had the opportunity to offer the same deal again, I would have tried to get the house sold as fast as I could. I could have made more money by converting the deal's cash into deals. Now, I think that investors who aren't already financially stable should focus initially on immediate profits and consider long-term contracts later. 3. I might have had to wait an extra day to secure the best tenant. 4. This type of lease option transaction is not possible in Texas because of bizarre laws that were passed in 2005. However I live in Tennessee and we do not have any anti-investor state wide law yet. However, we do have a shoddy local law regarding trash left over from expulsions. The law is not that big by contrast.