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Slide 1: ==== ==== go here to get some great tips for RealEstate Wealths; http://peter13466.my-real-estate-wealth.com ==== ==== We bought our very first investment property in a foreclosure deal. It was our first introduction to a motivated seller. The bank didn't want to own residential real estate and was anxious to get rid of the property. We bought it under market value and it's rental income and value has doubled in the last 7 years. Our current home was just about to be listed because the owner got transferred from Vancouver to Victoria. She didn't bother to price her home any higher than what she'd paid, as she just wanted out. We bought the property for under market value and avoided a bidding war by scooping it before it hit the market. These are just two examples of good deals we have made by finding motivated sellers. On the other hand, we've also found that some of the most motivated sellers were motivated because they wanted to ditch their piece of garbage property! In the same vain that we always say "No money down doesn't mean it won't cost you" we also say that a "motivated seller may be motivated for the wrong reason"!! We'll call the type of motivated seller I'm talking about a "flipper". A flipper is someone who bought the property, fixed it up and is now selling it...and wants to get rid of it quickly. When you find a flipper that is anxious to sell you often will find someone who has cut corners on the work just to get it done, and you may just find yourself spending a lot of unexpected money on repairs and surprise problems. Now, I have to mention that not every property that gets fixed up and flipped will be done with lack of care and concern for quality. But, you have to be very careful when buying a fixed and flipped property. We made the mistake of buying from a flipper in Toronto. It was a land mine of a property full of shoddy work and the cheapest possible materials. The worst example of this was the telephone wiring that had been used instead of electrical wiring - and yes, it melted and started to spark because it wasn't the right grade for the electrical currents. Thankfully the lights had stopped working, so it triggered us to get an electrician to start punching holes in the walls before any fires were started! The property had all the signs of being a cheap fix up, but we weren't really aware of what could go wrong at the time. We ignored the signs and bought the property from Mr. Flipper and he was so helpful that he even assisted with getting us financing. In addition to spending $25,000 to completely rewire the house we had to redo the plumbing in the basement and totally renovate one of the three bathrooms. The basement flooded thanks by tree
Slide 2: roots dissolving the clay pipes and plugging things up. We had to dig up one of the bedrooms in the basement and the entire front yard (which we had just landscaped a month before) to get to the pipes. While the plumbing work was being completed we had to put our tenants up in a nearby hotel for $200/night each.   The main floor bathroom we renovated because cracked tile and an awkward 5 inch step up to reach the sink and toilet were frustrating to deal with. We discovered lazy plumbing practices had created the 5 inch "step up" that the toilet and sink had been on... and the cracked tiles were as a result of tile being laid on top of tile!   The red flags were waving in our faces but we didn't really recognize the signs and looked the other way. The property had so many good things going for it: It was priced right, It was located in a perfect area for a rental property near downtown Toronto and steps from the subway, And, it had good rental income from it's three units. We were too new at the investing game to realize the trouble we were about to get in because this motivated seller was motivated to ditch his crappy property BEFORE he was responsible for cleaning up the mess. When we tell this story so many people smugly say to us "Well, that is what you get for not having the property inspected by a professional". The issue is: WE DID HAVE IT INSPECTED! Wiring is BEHIND the walls. The wires aren't visible unless you punch holes in the walls. Bad plumbing isn't visible unless you get underneath the floors or send a camera down the pipes, and other things seemed minor on the surface but were serious once you tried to repair them. That said, we were still at fault and could have avoided this big mess because there were warning signs and we ignored them. Here's the big lesson we learned: if there are things on the surface that look poorly done - then it's nearly guaranteed that the things you CAN'T see are even worse. When the finishings and the work you CAN see is high quality, then the things you can't see (like plumbing and electrical work) are more likely to have been done well. here's some warning signs to be aware of: An investor that wants to sell because they want to invest in something else. This is not a red flag; but it would prompt us to ask more questions. The reality is, many investors will hold onto a property forever if it's making them money. So, if this property doesn't fit in their portfolio anymore or isn't making them money, try and figure out why. Is something in the area changing that you should know about? Is it a problem you can fix, like bad tenants or poor management? There are a lot of reasons why an investor might sell, and many of them are legitimate, but try and figure out if there is a reason that should concern you or if it's an opportunity to solve a problem.
Slide 3: Someone who says they 'have to sell' but refuses any offers below what they paid or below what they think it's worth. Someone who bought the property, renovated it, and is anxious to sell it. There are a few reasons why this is a red flag, but the biggest one is that the reason this person bought it and renovated it, was to make a profit from the flip. This can mean they cut corners to save money and it definitely means they are going to be trying to get top dollar for the property. Trust your gut; ours was giving us warning signs on the Toronto property but we didn't listen. We love that property, and we even lived there for a few years because its location is fantastic, but the property's problems have cost us over $50,000 in five years. Even though it puts over $500 a month of positive cash flow in our pockets, it's going to take us a LONG TIME before we ever make that money back. We've even put it on the market a couple of times to sell it, thinking that we should recover our costs, but we never ended up getting the offers we wanted so we still own it today. And, while it's a good money maker, it still gives us problems. My point is not to say that you should never buy from a flipper, nor will every flipper will do a poor job on a renovation - but in most cases a flipper is not likely to be the motivated seller a real estate investor is looking for. As a real estate investor, you will find the best opportunities buried within problems. Motivated sellers have problems. They are motivated because of their situation - and that situation is an opportunity for you to solve their problem and make a better deal because of it. There are plenty of reasons someone might be motivated to sell their house: sickness, job loss, divorce, moving, and even too much debt, among other reasons. In these situations, you will find a motivated seller that NEEDS to sell, and will sell at a lower price just to solve their problem (or will give you better terms on the deal whether it be seller financing or longer due diligence periods etc.). In MOST cases, someone who has purchased a property to fix and flip it, is not motivated for the reasons you want as an investor. They will NOT accept a lower price because they have costs to recover and profits to make. It doesn't mean every fix it and flip it house is going to be a money pit - like the Toronto triplex we bought has been. It just means that as a real estate investor looking to maximize cash flow (which means minimizing the purchase price and then maximizing the rent and minimizing expenses each month), buying from a flipper is the least likely to produce the best deal. It also can result in buying a problematic property, if you aren't careful. Learn the secrets to becoming a millionaire real estate investor...in your spare time with Julie's free real estate investing newsletter. Get the Rev N You with Real Estate Starter Tips Guide free when you sign up at http://www.revnyou.com Article Source: http://EzineArticles.com/?expert=Julie_A_Broad
Slide 4: ==== ==== go here to get some great tips for RealEstate Wealths; http://peter13466.my-real-estate-wealth.com ==== ====