Buying FSBO (For Sale By Owner) real estate, or houses for sale by owner, have their own particular problems and opportunities. Dealing with an uninformed seller who thought he knew enough to handle everything by himself can be frustrating, but it can also be very profitable if you are prepared.  First you need to understand the FSBO seller.

People try to sell a house on their own for one primary reason: To save the sales commission.  Unfortunately for them, they usually underestimate the cost and complexity of going it alone.  They'll often get frustrated and tired of the process, and be ready to drop the price and be done with it.  If you help them solve their problems, your reward can be a good price on a good investment.  Just keep the following in mind:

1. A seller isn't an agent.  You have to be more careful in what you say and ask.  Avoid negative comments about the house.  Like it or not, the truth is that it's difficult to get a good deal if the seller doesn't like you. 

2. Sellers think they're being smart.  If you encourage that belief, they'll be more open to your offer.  If they have a good idea, tell them so.  It's not unethical to make people feel good about themselves when negotiating.

3. FSBO real estate has often been on the market a long time.  Sellers are usually tired of the process, and want it to be done.  This means you'll get a better price if you are willing to close quickly and easily.

4. Seller's usually don't have a plan.  They don't know where to close, where to buy a title policy, where to keep a good faith deposit, etc.  Have simple solutions ready for all these problems.  If you walk the seller through the process while letting him feel in control, you'll both be happier.

5. Skip over problems and return later.  After a seller has invested more time with you in a negotiation, he'll be more inclined to give you what you want.

6. Sellers have often spent more than anticipated. Classified advertising and other costs have already eaten into their imagined extra FSBO profit.  You may want to be generous in negotiating the many closing costs - as long as you get your price and/or terms.

Real estate professionals will tell you that most houses "for sale by owner" net the seller less than those sold by an agent.  By the time a seller realizes this, it's often too late to recover his money and time spent.  At this point, he usually just wants to get the thing sold as easily and quickly as possible.  If you help sellers with that, you can get a good deal on FSBO real estate.

                                

The real estate market is one of the most complex markets in the entire world due to the fact that it is in a continuous change, thus making it a very dynamic market. The internet has a lot to offer consumers regarding real estate and as a result it is a great place to start shopping. Some of these advantages are:

- It is inexpensive, if not free to list your home in an online property listing service.

- It is a quick and easy method to advertise your property that is for sale/lease or if you would like to buy a property.

- The buyer and seller have direct access to information about the property in question. This makes other forms of communication between the buyer and the seller obsolete. The internet is easy in comparison to the old-fashioned method of answering dozens phones calls or setting up numerous meetings.

- Many websites that deal with real estate allow you to include up to 5 photos of your property. This is a lot more in comparison to a regular newspaper and you have complete control over the photos’ quality.  In addition you can highlight specific features about your property with the potential buyers. This can be very helpful if you are working to attract buyers from outside your local geographic area whom potentially need more explanation of certain elements.

- Once listed, your home is available until you sell the property. This is a big advantage if you consider that for a newspaper ad you will systematically have to pay a fee week after week.

- These online real estate listing services have a nation-wide audience which will make your ad visible to the entire country;

- Searching for the right house is very easy as these websites have filters which will allow you to only see the houses that meet your specific requirements. Therefore you can spend time looking only at houses that meet your needs without having to waste time looking at houses you aren’t interested in.

Using the Internet for real estate will make you your own real estate agent without having to pay a great sum of money to an agent and also you will have full-control of the entire activity. Whether you are a home buyer or seller, it is very easy to search for the perfect house as the online offers are endless.

Online real estate has become popular and is consumers are looking to the internet more each day as an easy place to get good information. As a matter of fact, more than 5 million people use the internet for real estate issues every month. With numbers like this it is easy to see how the internet can improve your chances for selling or buying a home.

Another major advantage of real estate moving to the internet is that you won’t need a real estate agent to start your search. This is very important because we all know that real estate agents are of value but sometimes you just want to look.

All in all, there is no better, safer and easier way to search for a home or to sell one than online as the internet has a lot to offer in the real estate market and it is rapidly developing, gaining more and more consumers everyday and thus improving your chances for a profitable buy/sell.

In a future article I will list all the many reasons why you should use a real estate agent, stay tuned.

Sometimes it’s helpful to sell your home before you really want to move. This often happens when you are having a new home built, but aren’t sure of the completion date. Is there any way you can sell your home so you’re sure of the funds available for the new purchase, but continue to live in your old home until construction of the new one is complete. Yes, there is with the renting back strategy.

Enter the Lease-Back or Rent-Back Agreement

The particulars of this strategy vary from state to state, but in the strong seller’s market we’re experiencing, buyers will often agree to let the seller stay in the home for a period of time as long as rent is paid. In a competitive situation, the buyer willing to do this will often have the winning bid even though there is another offer as high as his or hers.

The agreement covering the situation states the length of time the seller will remain.  It can be done with a specific date named or wording that allows the seller to remain up to a specific date with the possibility of her or him moving sooner. The amount can be a fixed figure paid out of the proceeds of settlement or a monthly amount, or a daily amount. It is usually, but not always, tied to the amount of the mortgage payment under the buyer’s new loan. Sometimes there is a deposit against damage, sometimes not.  There is usually a clause saying the seller will hold the buyer harmless for any damage to himself or his property which occurs after the sale is consummated and before the seller moves.

The attorney who draws up your contract offer can create such an agreement. If you’re using online forms, you should be able to find one for this situation. If you’re working with a real estate broker, he or she can handle it for you.   

If you have recently purchased some real estate for investment purposes, you are in good company. Recent reports suggest that as many as 25% of these purchases are made by those who plan on using the property for investment purposes only. If you hope to "flip" the property there are 4 things you must be aware of that can put a crimp on your profits.

1. Property Taxes.  Keep the property for a few years and you may experience a surge in property taxes especially if your taxes are reevaluated during that time. Some hot real estate markets have seen taxes nearly double in just 5 or 6 years.

2. Renovation Expenses. You may have purchased a "fixer upper" at a bargain rate. Once your project is complete will you be able to recover the expenses and make a profit especially if the value of your renovated property is above those in your neighborhood? In addition, can you withstand a correction in real estate values?

3. Insurance and Mortgage Costs. You will pay more for homeowners insurance if you do not occupy the residence and you have tenants. If you are financing the property you know that your mortgage rate is higher as well.

4. Rental Pressures. A market saturated with rentals will mean that the rents you can charge will be less than what you had hoped to receive. In some markets you are required to get special licensing in order to be a landlord. In other markets the legal rights of tenants mean you could have a lengthy and expensive battle in ridding yourself of a bad tenant. Will the lower income levels coupled with the added expenses drag your investment down?

Of course, you can limit your risks [and costs] by doing the majority of the upgrades yourself, appealing excessive property tax increases, and finding for yourself a trusted and dependable tenant. It isn't easy flipping a home, but with a lot of pluck and determination it can result in strong profits for you.

Where are the best investment real estate locations? If you have enough experience investing in real estate, you can make money almost anywhere, but there are always places that are better or worse for real estate investments.  For maximum profits, you want places that have a better demand/supply ratio. You can use the questions below to find them.

 1. Does the area have decent job growth? Ask local authorities and use census information. Ideally, you want to see job growth equal to or exceeding population growth. You also want areas with professional jobs moving in. It is estimated that for every professional job created, there are four service jobs created, and all those employees need a place to live.

 2. Is the population growing? You can check the US Census figures online, or ask the local government if they have the statistics. Stay away from areas that have little growth.

 3. Is there a decent quality of life? It's subjective, but important. Are there theaters and bookstores? Count coffee shops and cafes. Trendy areas usually have increasing demand for housing. It's also a good indication of a high quality-of-life if people are willing to take lower-paying jobs just to live there.

4. Is there wealth in the area? It's a good sign when there is some degree of wealth in a town. Look for nice homes. Wealth means everything doesn't die when the economy slows.

 5. Number of homes for sale? Lower supply of homes for sale means upward pressure on prices. This indirectly drives up rents as well, which makes for better investing.

 6. New construction? Census figures can tell you what's happened over the last ten years. Check with the local authorities to see if the number of housing units they've issued permits for is more or less than the expected population growth.

 7. Rent and vacancy levels? Rents have to be high enough, and vacancies low enough to justify investing. A friend told me when he first moved to San Antonio, every building had vacancies, he saw a man holding a sign that read, "Apartment - $250 Per Month." A great place for renters, but not so great for landlords.

 8. The available land that is buildable? Of course, less available land is better for future appreciation. When the land runs out, the prices start accelerating upwards.

When you use these questions to compare various towns and cities, you'll see the differences more clearly. You'll have an idea about how housing demand compares to supply in each. This will help you pinpoint the best investment real estate locations.

Why would you buy investment property without seeing it? It's a numbers game. Whether or not you see the property before you make an offer isn't nearly as important as making sure the numbers make sense.

A man in California used to just send out offers on a hundred MLS listings at a time, offering 25% less than the asking price on each one. Occasionally a few sellers would accept his offers. He never had to look at the homes beforehand. Including an "inspection and approval" clause in the offer meant he could always back out of the deal later when he saw the house. Meanwhile, he efficiently found the truly motivated sellers.

This true story demonstrates that with a good clause or two in the contract, you don't have to worry about making an offer before you see a property. It's true when you buy investment property or your next home. When it isn't everything the seller says it is, you can reject the deal with little or no loss. So why wouldn't you want to look at the property?

The main reason you might skip looking at a property before making an offer is time. This is certainly true if the property is far away. If you don't get a price that makes sense, why spend your time traveling to look at real estate investments? A price and terms that make sense - this is what is important. Of course you'll probably want to look at the actual property eventually, but looking at the numbers is how you invest.

Investors value income property according to current cash flow (or should if they want safe and viable investments), so start by verifying income. Get the actual income figures for the past 12 months. Always consider the potential income if rents are raised, vending machines are added, etc., but base your offer on the current income.

Verify all expenses with investment properties. If any expenses listed by the seller seem unusually low, they most likely are. Just substitute your own best guess in place of any suspicious numbers.

After you determine the net operating income, apply the appropriate capitalization rate to arrive at the value. If you're not sure how to do this, get help. However, you really should understand the principle of how to figure a cap rate. This is a numbers game you're playing. 

Calculate loan payments (talk to your banker), and see how much cash flow you'll have. Then you can figure your cash-on-cash return based on how much of your own money you put into the deal. Just divide the cash flow by your investment.

When the numbers work, you can safely make an offer. Inspections will tell you if there are problems that will affect the cash flow. You can always renegotiate if there are such problems (assuming you made your approval of all inspections a contingency of the offer). Of course, you can even go take a look now that you are truly ready to buy that investment property.


Here's your free software:

Practically every financial planning and personal finance book you'll ever read advises you to start an emergency savings fund, to meet unexpected financial emergencies, as one of the first steps you should take to build wealth. Recommendations range from several hundred dollars to twelve month's income. So, with all this conflicting financial advice, how much money should you save for financial emergencies? You're about to find out. :-)

Some advise a fixed dollar amount, such as $500 or $1,000, be set aside for financial emergencies. I've seen recommendations ranging from $500 to $12,000.

Others recommend saving a certain number of month's income for financial emergencies, such as three month's income, six month's income, or as much as twelve month's income.

Still others suggest setting aside a certain number of month's living expenses, such as three month's living expenses, six month's living expenses, or even twelve month's living expenses, to meet unexpected financial emergencies.

So...

With all this conflicting financial advice...

How much money should you save for financial emergencies?

Well...

According to Wallace D. Wattles, author of "The Science of Getting Rich"...

If you truly want to be wealthy...

None.

That's right...

Absolutely none!

In an article titled "The Constructive Attitude", Wallace D. Wattles wrote:

"... Do not lay up for a rainy day. If you live right, think right, and work right, there will never be a rainy day for you. If you lay up for a rainy day, you will impress the sub-conscious with the fear of a rainy day; with the idea of weakness and incompetence, and so you will cause the rainy day to come."

If you stop and think about it...

He's absolutely right!

I don't know about you, but every single time in my life I attempted to build up an emergency savings fund, guess what happened?

That's right...

A financial emergency would pop up out of nowhere and wipe out my emergency savings fund leaving

I right back where I started...

Broke!

Sound familiar?

Until I read those words by Wallace D. Wattles, it never dawned on me that, by my own thoughts and actions, I might be creating the very thing I was most trying to avoid.

Now...

Does this mean you shouldn't keep any extra money at all?

Not at all...

In the same article, Wallace D. Wattles wrote:

"... Provide a surplus, so that you may take advantage of any new opportunity..."

Once I began to build up a surplus to take advantage of new financial opportunities, instead of saving for financial emergencies, guess what happened then?

That's right...

Lo and behold...

New financial opportunities started popping up all over the place...

And...

Interestingly enough...

The financial emergencies disappeared!

You see...

There's a Creative Power within you that makes your life into the exact image of that to which you focus your attention.

If you focus your attention on financial emergencies, by thinking about them, by preparing for them, by saving for them, that's exactly what you'll have in your life...

Financial emergencies.

On the other hand...

If you focus your attention on financial opportunities, by thinking about them, by preparing for them, by providing for them, that's exactly what you'll have in your life...

Financial opportunities!

Four ways to boost your retirement income

1. Open an IRA
2. Look into auto-escalating your retirement savings.
3. Adopt the buddy system
4. Funding retirement with rental property income.

There are many ways to buy a home, even if you have little or no money to put down. Here are a few of the basics:

1. Sweat Equity

Sweat Equity is a way to get a home by trading work for equity in the house. This could be used for a down payment or for purchase later.  This is a great technique if you are handy with tools, yard-work, and paint.

Look for fixer-uppers in neighborhoods you are interested in. Many times these homes will have a hard time selling and the owner is ready for just about any offer. You will find these houses ranging from just needing a little “cosmetic” work like landscaping or painting, to totally trashed out houses in need of some serious renovation. If you are into repairs, this is a great way to get a home for a good deal.

If you are not skilled at repairs and renovation, be careful about fixer-upper homes. They could end up costing you quite a large amount of money to pay others to fix.

I also recommend getting a home inspection so that you know what exactly you are in for before you begin.

2. Seller Carry-Back

Look for a home with an assumable loan. Instead of buying out the owner's equity, ask the seller to carry back a second mortgage for the rest of the money owed. If you can get the seller to carry all of the rest, you can get the home for no money down.

3. Offer an Object for the Down Payment

 Offer something other than cash (land, a car, a boat, or valuable collectibles) to the seller instead of a cash down payment. This is why it is important to listen to sellers.  Find out what they want and need.  Maybe you have (or can get) just what they need. For instance maybe they wanted to use the down-payment to buy an RV and it turns out that you just happen to have one you don’t need. Offer that vehicle as a down-payment, and it saves you from coming up with the cash.

4. Offer Services for the Down Payment

Offer your services or expertise to the seller in lieu of a down payment. Some examples include $10,000 worth of auto services if you're a mechanic, dental work if you're a dentist, desktop publishing services if you're a designer, artwork if you're an artist or legal work if you're an attorney.

5. Foreclosures

Look for foreclosure properties that require little or no down payment. Some lenders and government agencies will let you buy a foreclosure with no down payment if your credit is good and they're anxious to have the home occupied, or if you have skills (carpentry, landscaping or even painting) that you can use to increase the home's value. Distressed properties - assume with little or no down to save foreclosure.

6. VA or Other No Money Down Loans

 Look for conventional loan programs such as VA or FHA that require little or nothing down.  VA loans have helps countless veterans get into their homes. There are often programs available to first time buyers or people who are distressed (such as with Hurricane Katrina) that will help people get into a home with little money down.  You usually will have to qualify for the loan with the bank, though.

7. Find an Investment Partner for Equity Sharing

Look for an investment partner who'll put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.

8. Wrap-Around Financing

Wrap-around financing is where you assume a seller’s VA Loan by doing a new Contract for Deed.  Since this contract is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount, but the rest of the purchase price of the house, letting you get in with little or no money down.

9. Rent-to-Own or Lease-Option

This is really is one of the best ways to get into a home of your own when you can’t get a bank loan.  Remember that you may still have to get a loan down the line.  If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house, so you can use the time to fix your credit, or use one of the other options that are discussed in our book to purchase the house at that time. You can always try to negotiate another 5-year lease-option if you need more time. (For more detailed infomation on lease-options, check out our free ebook, "Buying a Home When You Have Bad Credit" at http://I-can-buy.com.)

10.  Government and Community Down-payment Programs

There are many community and non-profit organization programs out there to help people get into homes of their own. Many of these do no require any money down.

There are some organizations and programs that will pay for some or all of the down payment for you. Generally these are for lower to moderate-income individuals, but these days that includes a lot of people. You also usually have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan.) If you have been unable to get into a home because you don’t have enough money for a down payment, then maybe one of these programs will be for you.