Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

How to Buy Houses with Equity in Real Estate Investing

By Simon Macharia Subscribe to RSS | January 16th 2012 | Views:
loading
 
  



In real estate investing, you are likely to make losses if you do not buy low and sell high. This means you must buy houses with equity. This rule generally applies to all business models.

So how do you know that a house has enough equity to make a profit for you?

When I bought my very first real estate investing deal, I simply gambled with numbers. At the time, the real estate market always promised that the prices would appreciate with time, meaning you could still make money even with marginal deals.

Even though I did not lose money in the deal, I almost gave up in pursuing more deals because I did not think the effort justified the returns. The numbers had looked so good I did not think there was any way I could lose.

Let us take an example:

Suppose you are buying a $200,000 house for $160,000. It might look like you have an instant equity of $40,000.

Let us take a deeper look at these numbers.

Assume that you just need to replace the carpet and repaint the house, plus a few minor touch-ups. You are taking a mortgage on it, with $1300 monthly payments.

We will assume that you will complete repairs within 30 days, and that houses are sitting an average of 90 days on the market before you can sell them.

Your numbers will look something like this:

1) Holding costs for 4 months: $5200

2) 2% closing costs when buying at $160,000: $3200

3) 2% closing costs when selling at $200,000: $4000

4) 6% Realtor's commissions when selling the house: $12,000

5) Carpet, paint and minor touch-ups: $10,000

6) Property taxes prorated for 4 months (approximate): $1050

This is a total of $35,450 assuming nothing goes wrong.

In other words, your total expense in this deal is $160,000 plus $35,450, or $195,450.

Your profit in this deal is just $4550!

If anything goes wrong and you end up spending more in repairs, or it takes two more months before you can sell it, you are end up making a loss in the deal.

This scenario is quite common with real estate investors.

When you do your numbers, you must use PERCENTAGES instead of dollar figures.

When I buy my wholesale deals, I acquire them at 65% minus repairs or lower.

Remember you also need to sell your properties at a discount to get them sold.

Your house also need to be really attractive both in the asking price and overall condition to get noticed. Since buyers have more houses to choose from, they have become more picky.

To make them more appealing, you might have to spend more on repairs.

You could end up holding the house as long as 6 months, increasing your holding costs.

You are more likely to remain profitable in your real estate investing business if you work with percentages that give you a good return on investment for your business model.

Simon Macharia - About Author:
Successful investing in real estate requires that you acquire your deals cheaply and sustain a continuos flow of good deals that make you a profit. Learn how an automated, interactive real estate investing website can help you acquire more deals using less time, money and effort.

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/real-estate-articles/how-to-buy-houses-with-equity-in-real-estate-investing.htm

Related Real Estate Articles Subscribe to RSS

Real estate listing with Discount realtor
Published by Jim Shoun on May 3rd 2012 | Real Estate
How much do you understand the advantages of real estate listing as For Sale By Owner? Well, list of...
 
Kelowna real estate is the best properties of Canada
Published by Warner on April 23rd 2012 | Real Estate
Kelowna real estate is the most reputed name when it comes to purchasing a residence in the locality...
 
Rental property- its difficult to find without estate agents
Published by Matthew Watson on April 16th 2012 | Real Estate
A proper research of the property market, its trends and different rents in different localities nee...
 
Hire estate agents Marlow for smooth property deals
Published by Ricky Charles on January 4th 2012 | Real Estate
Many businesses have flourished and doomed but the real estate business has somehow managed to keep ...
 
Real estate agents for your property needs
Published by Glyn Jones on June 4th 2012 | Real Estate
The estate agents can help find the right kind of properties that suits your specific requirements a...
 
Residential real estate in India- a lucrative investment
Published by Deepti on April 30th 2012 | Real Estate
Buying or selling property is always a great investment option as it is likely to give good prospect...
 
Reasons for hiring an expert real estate agent to invest in property
Published by Deepti on April 17th 2012 | Real Estate
Buying your dream home for the first time is an incredible learning experience. Today, with the help...
 
Consult an expert only to ensure best real estate investments
Published by Jennytoedt on April 17th 2012 | Real Estate
Escalating estate prices have given good returns to its customers, provided the property has been ch...
 
Investment options in residential sector of real estate
Published by Deepti on May 10th 2012 | Real Estate
Residential real estate in India is a booming industry and attracts investors from different parts o...
 
Awesome place naples florida waterfront real estate
Published by Harry on June 19th 2012 | Real Estate
waterfront homes for sale in naples florida. This is a community that is highly sought after for go...
 
Cape Coral real estate a bargain in waiting
Published by Anne Mary on December 10th 2011 | Real Estate
The real estate markets in Florida and Cape Coral in particular continue to flourish, with some fabu...
 
Reasons for hiring an experienced real estate agent
Published by Deepti on April 17th 2012 | Real Estate
In today’s world if you want to be successful while investing in real estate you can hire the serv...
 
Online estate agents to sell your property
Published by Matthew Watson on April 29th 2012 | Real Estate
Using an online estate agency will allow property owners to perform the majority of the sales proces...
 
A quick note almost profitable real-estate or else real estate management
Published by Ema Sis on January 14th 2012 | Real Estate
This article deals with property management which is always dealing with the general administration,...
 
 
Port Washington NY Real estate is a boom for investors
Published by on July 14th 2012 | Real Estate
Investors whether they are small or big, always looks for an opportunity and many of they are contin...
 
Tips on how to make money on real estate foreclosures
Published by Shaz Memon on December 26th 2011 | Finance
Making money on real estate foreclosures is indeed a good idea. Get cheaper ones and earn good money...
 
Some critical points to consider with estate agents
Published by Glyn Jones on January 19th 2012 | Real Estate
The estate agents can be much helpful with the real estate investments. So you are to be very carefu...
 
Penang: the property hotspot in real estate Malaysia
Published by Jeevan Nanthan on April 6th 2012 | Real Estate
Also, the high end condos and homes at Batu Ferringhi and Tanjong Bungah have helped in making Penan...
 
Select the correct estate agents.
Published by Matthew Watson on August 18th 2012 | Real Estate
Deciding on the right real estate agent can preserve you a lot of time, income and headaches. They w...