Q: How do you know what a fair price is?
A: Go to the making money real estate articles the question is answered there.
Q: How much should I charge for rent?
A: The easy answer, purchase price for house (or one apt unit) divided by 100 if a house cost you $100,000 then the rent is $1,000 a month. Having said that, you need to know what similar properties are renting for in your area. About every six months go look at a few similar properties and get the current rent rates, adjust your rents as needed. The prevailing rental rate information is critical when buying to help you set the price you will pay.
These two web sites will help you determine the rent rates in your area.
www.propertyledger.com and www.rentrange.com
Q: How much should I improve a property?
A: The quick answer is enough to attract tenets. When you look at other properties to buy (or get a feel for the rent rates), look at condition and amenities offered as a guide for your own properties. I only improve a property good enough to attract rents in a given price range. When I show a property and the potential renters are leaving, I ask them what they would like to see different or what they did not like. Just ask them if you can ask a few questions. Do not over improve your property, but don't be a cheap-skate either.
Q: How do I know a good deal when I see it?
A: You will know it when it happens. Reading all the articles on this site will add to your knowledge that will help you spot great deals. My general rules of thumb is for a property to be considered for purchase it must have, a 15% plus cap rate, the property's expenses may not exceed 50% of the rent collected, the property's asking prices is less then ten times the annual net income. I like properties I know are being rented to cheaply.
Q: How do I find good deals?
A: Look, look, and then look some more. Tell everyone, I mean everyone, that you are looking for real estate to buy and pass out your phone number liberally. It may well take six months of broad casting that you are looking but a deal will come your way. Look at REO web sites, check the newspapers and drive the streets. Always be looking at properties. 100 properties later you just might find that deal. If not start on the second hundred, deals are out there, millions of them, so look, always and often. Don't forget to check out Craigs list, read the classified papers, and tell all your network of friends and acquaintances. Read the articles on this web site for more ways to find deals.
Q: How do I get the money.?
A: The short answer is anyway you can. Read this web site's articles and you will find ways to get the money and ways to reduce the amount of money needed, plus information on financing. Money is but a tool and everyone who has it, needs it to be working, so the money is there for you to find. Read www.personalrealestateinvestormag.com magazines for additional sources.
Relatives are a great place to get loans. As you are telling everyone you are looking for properties some will ask about the business and lending you money to buy with might be their way to participate. You can also find partners. Be creative, you have accesses to more money then you think you do.
Q: How do I overcome the fear or butterflies in the stomach.?
A:This is a hard one? Do your first deal. I did my first deal (a duplex) with a Realtors help to hold my hand through the process. I did not make much money on that first deal and I sold it a year later for a break even. But I needed that first deal out of the way. My next two deals where owner carry notes and very profitable, one of which I still make money on thirty years later. Find a small property that will at rent for at least enough to cover the nut and just do it. When the world doesn't come to an end your butterflies will begin to head south.
Q: Why don't more people do real estate investing if it is so good?
A: Fear, fear of loss, lack of money, fear the renters will tear things up and on and on. Lack of know how is at the root of fear and misunderstandings of what it is like to be a landlord. Just remember someone owns all those rent houses and apartments, more people are landlords then you might suppose.
Q: How do I avoid bad tenets?
A:Most of the type behavior that makes for a bad tenet is avoidable if you screen your tenets. Charge a application fee of say $45.00 and then pay to have the possible renters background checked. This can be done on line. Call the potential renter's past landlord(s) and their job reference. That will help you avoid most of the problems. If the tenet can not pay a security deposit, and the rent, then how can they pay the rent when do?
Q: What if the renters tare things up?
A: Despite your best efforts you will sooner or later hit the bad renter. So lets us put the damages in perspective. What is the worst that can happen? stolen appliances? holes in walls? etc? It has been my experience that all this damage might cost abut $3,000 to fix and rarely does it cost $5K (only once in my thirty five years). The average bad tenet cost about $1,500 including eviction. So put $3,000 in a savings account and you will sleep better. Most every time I have had this happen after fixing a ruined apartment I was able to raise the rent $25 to $50 a month and I soon had my money back.
Q: I have two rentals houses but they barely make any money?
A: I suppose you mean they have very little cash flow beyond the payments. I have had several of these over the years and loved them all. One I kept until paid for by the renters then the rent was all profit. Also you still make money assuming you are raising the rents every year (about 4%) to cover repairs and taxes etc. You make money from the value of the property appreciating, you save money from tax savings when you depreciate the property and you get a little richer every month from the mortgage note principal reduction. Long term you win.
Q: What are the average returns on real estate investing?
A: Depends and varies widely. Having said that about 12% if you pay cash for the properties. The total returns from all the ways the property makes you money can be as much as 15% to 20% return per year. If you use some leverage or if you find ways to add value the returns can easily beat 12%. See the articles making money with real estate and real estate syndication for more on this.
Q: I have not had much luck with real estate agents. Your take On them?
A: One in one hundred agents are any good. Most are so concerned with their commission they serve neither the buyer or the seller very well. Mediocre is the word that comes to mind. Most often they are in the way of a deal getting done. Those agents who are the top producers and close the most deals do not worry about commissions they just do deals and those agents I like. They let the pay check take care of it's self. A good agent takes care of you the buyer, because that serves the sellers best. Those agents who do not get that the buyer is important leave the trade when the market turns down and the going gets tough. There few agents who are good agents can be found if you are always looking for deals the two of you will cross paths.
Q: Why is it so hard to get started as an investor?
A: Because there is never enough money and you have a lot to learn. Then there is figuring out where to start. Start by reading all the articles on this web site. Then just do that first deal to get your feet wet. As for the fear factor just keep in mind that the risk is only the difference between what you pay for the property and what you sell it for if things do not work out. The risk is only a few thousand dollars, and you risk that much when you buy new car. As for getting loans, it is a matter of filling out loan request until someone says yes. I was once turned down thirteen time before I found a yes at 10% down. But I got the loan. The biggest obstacle to getting rich in any endeavor is looking at you in the mirror.
Q: How much interest should I expect to pay?
A: As little as you can get by with. Actually, figure out the net operating income from a property, then take the loan if the interest rate is 75% or less of that properties net income percent. For example, if a property net annual income is 12% of the cash purchase price, then a loan at 7% or 8% or 9% is doable. The lower the interest rate the higher the positive cash flow. Another way to look at loans is if the loan payments are 75% or less of the net cash flow, or if the payments are 50% or less of the gross rents.