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REAL ESTATE NEWS - Real Estate Investment as a Retirement Tool-Tips From the Players.
4 Ways to Make Money on Real Estate Investments
Many real estate professionals use their experience in buying and selling properties to finance a comfortable retirement. "As real estate professionals, we're uniquely qualified to implement various investment strategies and to see opportunities that many people are never exposed to. Those who don't participate are missing a golden opportunity," says Dan Bohlke of Bell-Key Properties Inc. in Hampton, Va. Consider these real estate investment strategies.
1. Buy and hold for rental income. For the last 14 years, Bohlke and his business partner-wife, Karen, have been systematically buying well-located single-family homes at or slightly below the current median sale price for their area-from $80,000 to $120,000. Most are acquired by assuming existing mortgages of former owners or through owner financing. Once the properties are paid off, they generate about a 7.5 percent to 8 percent annual rate of return. That means a $100,000 house that is paid for should produce about $7,500 to $8,000 a year in spendable cash flow after paying real estate taxes, insurance, maintenance, management, and other fees.
"You need just $1 million in paid-for real estate-or 10 homes costing $100,000 each-to produce a real retirement income of $75,000 to $80,000 per year," Bohlke explains. "It self-adjusts upward with inflation, so you won´t be living on a fixed income. And as the properties increase in value, so does your net worth."
TIP: Buy properties near each other; it´ll make management easier.
TIP: Using a professional property management company to manage your investments creates a liability barrier between you and your clients because the property manager handles all day-to-day operations and assumes a portion of the risks from issues such as lead-paint disclosure and fair housing practices. -Daniel Bohlke, Bell-Key Properties Inc., Hampton, Va.
2. Buy, hold, and eventually sell. Another strategy used by Dan Bohlke is what he calls "the real estate garden concept." Periodic, sequential investing involves acquiring properties at the rate of one or two per year and then systematically reselling them after 12 to 15 years. "The soil is your local real estate market, the seeds are the properties you acquire, and the fruit is rental and sale proceeds," he explains. "When your crop matures after 12 to 15 years, you can start selling the properties each year in the order of their purchase, using a portion of the proceeds of each sale to reseed your garden (acquire more properties) and using the remainder to live on in retirement."
With this approach, two properties acquired per year and sold after 15 years should produce a perpetual income stream of more than $100,000 a year, even after setting aside enough money to continue acquiring two properties per year.
Another choice is to sell off half the properties you've acquired over the years and use the sale proceeds to pay off the other half. This would create a cash flow from the remaining paid-for properties as in the buy-and-hold strategy above.
3. Buy and resell. Real estate professionals often have the advantage of recognizing changing markets or houses with untapped potential and are able to capitalize by buying low and selling high. Eric Goosen, Goosen Realty Services, St. Clair Shores, Mich., buys two-to-four-unit rental buildings. Because he lives at each property, Goosen´s often able to put only 10 percent down, as opposed to 40 percent or more for investment property. Often he holds the property for two years, so he can take advantage of the $250,000 capital gains exemption on the sale of a personal residence to avoid a portion of the taxes on the sale. Goosen also renovates the properties to increase their value. If you are interested in real estate investment, contact me for a FREE CONSULTATION10 Tips for Buying a Fixer-Upper
Buying a basically sound house and updating the cosmetics is a profitable thing to do in almost any market. But be careful what you buy or it may end up costing you later on.
Here are 10 things to consider when selecting a fixer-upper:
1. Purchase homes that are at least 30 percent below the market value of comparable nearby homes.
2. Choose a location with a low crime rate, good schools, and quiet streets. There isn´t anything you can do to cure a poor location.
3. Choose a house with three or four bedrooms. Smaller homes are unlikely to have enough buyer appeal.
4. Avoid homes that need major unprofitable repairs, include wiring, major plumbing, foundation repairs, major kitchen and bathroom renovation, room additions, and/or a new room. Spending money on these basics doesn´t add value. Buyers expect them.
5. Find a home that needs profitable cosmetic improvements like fresh paint inside and out, new light fixtures, new carpets and flooring, and fresh landscaping.
6. Look for affordable, low down-payment financing, such as taking over an existing mortgage, lease with option to buy, seller carry-back financing, or a combination.
7. Avoid obtaining new bank financing until the fix-up work is completed and the home´s market value has increased.
8. Don´t buy a fixer-upper that is more than 60 minutes from your current residence because it is important to visit everyday while the renovation work is being done.
9. Make sure that the seller or tenants will vacate immediately upon transfer of title.
10. Look for sellers who are motivated to sell and who want to make the sale happen.
Source: Inman News, Robert J. Bruss (09/01/07)
Hal Bates Lifetime C.S. resident with over 20 years of REAL Estate EXPERIENCE you can depend on! (719)266-0222 or
Have a look around from the top of America's Mountain, Pikes Peak
Use this site to view Colorado Springs Homes for Sale, and for rent, and Real Estate inEl Paso County. To include Monument, Black Forest, Falcon, Peyton, Manitou, and Fountain. You can use our MLS search to find Homes for Sale as well as Homes for Rent. For those of your not familiar with the term MLS, it is the Multiple Listing Service and is used by Realtors to list their homes for sale and rent. Currently there are around 4,000 homes listed. There is also a section on this site showing New Homes for Sale. For those of you needing to get financing for your new home, we have a section packed full of Mortgage Information and you can even apply for a new mortgage online. This site also has a lot of community information, consumer links, school information, free reports, and more! Hal Bates is the owner and a Real Estate Broker with over 20 years experience as a Colorado Springs Realtor and be happy to assist you with all of your real estate needs.
