Real Estate Auctions: The New Trend in Real Estate

You’re walking by a street and you see a huge crowd gathered in the lawn of a plush property, replete with a magnificent home. You wonder what the noise is all about and also what are all these men in suits and ties doing there on a sunny afternoon. You can feel the energy in the air as everyone gathered there holds and releases their breath at the same time. Then you see a man seated right at the front facing the crowd and he proclaims loudly, “SOLD!”

It then dawns on you that a public auction has just occurred, selling that magnificent property to the highest bidder. Now, you probably seem interested in the game too; however, you need to have a depth of knowledge in the field of real estate investing and real estate auctions before you step into the turf.

When Does a Real Estate Auction Occur?
That’s one question that you are bound to ask especially because you may wonder, why not use personal selling or put up an ad in the newspaper to sell property and do it without much hassle of a public auction?

Real Estate Auctions occurs in the following scenarios:

1. When Government land and property needs to be sold

2. When an abandoned property has been sitting still for a long period of time

3. When a land owner’s property is seized from him due to a judgment passed in the court of law

4. When the owner of the property is unable to repay his loan, the pending loan amount is recovered by auctioning off his property

5. When joint tenants of a property disagree on the property partition, the property is auctioned off and the money is equally divided.

Each of the scenarios mentioned above determine the rate at which the real estate property will be sold for. For example, a foreclosed property, that is when property gets taken away from the owner who is unable to repay his loans, is usually much less than the market value of the property, because the opening bid is a sum total of the pending loan amount, interest accrued and legal fees involved in the process. However, it is also possible that, if the loan amount is much higher that the value of the property, the property will be sold for a rate that is higher than the marker value.

In the other scenarios, the opening bid begins with the market value of the property.

The Benefits of Real Estate Auctions

For the buyer, the biggest benefit is that the price of purchase is decided by you. Also, foreclosures are a good investment because of lower purchase prices. The process of a public auction is fair, competitive and gives every buyer the equal opportunity to participate in it.

Since the public auction is open to all and takes places in full view of the public, a prospective buyer does not have to be worried about being cheated by the seller in any aspect such as not handling over the papers on time, or delaying the possession of the property.

For the seller, disposing off a property through real estate auctions is quick, there is no negotiation involved and he/she also saves the time and money involved in marketing and advertising of the property.

For both the buyer and the seller, real estate auctions save a lot of time as the process is quick and usually the property is sold within minutes.


When You Don’t Win a Real Estate Public Auction
Real Estate Public Auctions are like a race; while one is bound the win, the others will lose. The best way to handle loss is to keep emotions at bay because the excitement can overwhelm you and lead you to bid an amount that you possibly cannot afford. Therefore, the best way to handle such a situation is coming prepared for the auction by deciding on a minimum and maximum bid.

When You Win a Real Estate Public Auction
Winning a real estate auction is quite good news because you have earned yourself a good investment and you can now use the property either for yourself or to re-sell it when the market price increases or either put it up for rent. Either way, you are bound to benefit from your purchase.

When the auction is closed at your bid and you complete the necessary paper work after making your final payment, the property then comes to belong to you.

The uncertainty mixed with the fact that you are in charge of the purchase/selling price makes real estate auctionsthrilling. Therefore, you are either bound to strike a good deal, or none at all, making it a no loss no gain situation.

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An Insight into Real Estate Investment Tips

Investing in real estate is by far the most profitable one amongst all investment options says real estate expert Jeff Adams. It can be done by buying an apartment, a condominium, a bungalow or plots of land at strategic places.

These properties can be bought for self occupation/use, for letting out on rent or plainly holding them as investments and selling them when the returns reach the expected levels.

Unlike manufactured goods, or even gold and precious metals, the supply of land has always remained a static phenomenon.  As Mark Twain summed it up aptly, “They are not producing it (land) any longer.”

The demand for land and good housing properties has always been increasing, thus spiralling steep rise in property prices far exceeding the inflationary pressures on currencies. This is the prime reason for ordinary investors to put in their hard-earned money, saved out of much sacrifices, into land or housing property for decent returns beyond the wealth eroding power of inflation.

Housing Loans
Land and housing properties cost a lot in comparison to the disposable income earning capacity of the fixed income category of small investors.  It is neither feasible nor advisable for them to wait till they accumulate enough resources to invest into real estate, by which time property costs further escalate.

Fortunately, various types of home loans are available to small investors against the mortgage of such property after providing a down payment of about 10% to 20% of the cost of property.  These home loans basically fall into following categories:

Fixed Rate Mortgages where the interest rates remain constant. These are also known as conventional mortgage loans and offer a good option in a market scenario when the interest rates are considerably low.

Adjustable Rate Mortgages where interest rates are adjusted throughout the term of the loan. Here, as the name suggests, interest rates vary with the money market.

Hybrid Loans: These are required to be paid back within the stipulated period, but the payments can made either on a regular basis or adjusted to fit into the overall time period. These loans combine the aspects of both the fixed and floating rates of interest.

Transferable Mortgage Loans:  These loans can be transferred from the current owner to the new buyer. The new buyer will have to pay the owner the down payment and the installments paid for transfer of the mortgage loan.

FHA Home Loans:  These are insured by the Federal Housing Administration of the United States.

VA Home Loans:  These are guaranteed by the Veterans’ Administration of the United States and are issued to American veterans or to their spouses.

The Economic Cycles and the Interest Rates
One important factor to be considered while going for home loans to buy real estate property is the changing economic scenario and corresponding changes in the interest rate cycles.

During recessionary periods the industries and the businesses begin to grind slowly, the employment opportunities diminish and unemployment rises, the money supply with the ordinary public becomes scarce, the demand for investments is low and, hence, the interest rates fall correspondingly.  Contrary is the case when the economy of a nation is on the upswing.

The real estate market is most affected during recessionary times.  The defaults on mortgages become common, foreclosures or confiscation of the property by the lenders for defaulted loans, increase.  The recessionary periods, however, do not last too long.

But, because of an overall feeling of doom, an ordinary investor feels clueless when the good times will return.  This is the time when hedge funds swoop in like raven. Therefore, a small investor needs to exercise daring combined with shrewdness and caution at such times.

Hedge Funds
These funds possess massive capital and their motive to enter real estate market is to reap quick profits.  They have the technology and information to sniff opportunities.  Once identified a prospective market, they strike with their full financial muscle and buy properties en-bloc, even at premium prices, edging out all other small players.

Their game is to sell it off with equal haste when the demand picks up, pocket hefty profits and move on to other pastures. Their limitations do not allow them to block money for long on dud investments.

Hedge funds constitute the money pooled in by high net worth real estate investors, expressly for making quick profits.  Unlike the mutual funds, who deal with public money, the hedge fund managers are not much restricted in their investment decisions.  The federal regulations, however, have imposed certain lower limits on participating investors so that small investors might not get swept away by the greed and thus, sometimes, get totally wiped out in this risky squabble of big boys.

The arrival of hedge funds is a sure sign of the onset of spring after a long winter. The shrewd small investor can circumvent the game by riding on the back of these hedge fund sharks. The small investor need not get discouraged by sudden upshot in prices after a long period of lull.  The investor can buy any available piece of good property by paying a small premium price.

The increasing trend in prices is sure to add more worth to the property’s value.  The small investor can also go for adjoining pieces of good property and hold them a little longer than the inherent limitations of hedge funds in order to make good money.

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The Golden Rules of Real Estate Investing

Purchasing property is no longer limited to buying a cozy house or office space to call your own; its boundaries have expanded to being an investment vehicle to materialize large capital gains. However, real estate investing is one of the most volatile investment alternatives and among the most complicated ones too.

Are you seriously considering plunging into real estate investing? Then you probably have numerous questions running through your mind day in and day out with no definite answers. Let’s get you started with this seemingly humungous task with useful advice from experienced real estate investors; as they say ‘experience is the best teacher’!

Things You Must Bear In Mind before Buying Property

Haste Makes Waste
Yes, we all know that quite well and real estate investing is no different. The simplest of decisions pertaining to real estate investing need to be taken after immense consideration and advice from trusted sources.

You might have to wait longer than expected for the right chord to strike; but being impulsive is definitely a strict no in real estate investing. Procure all the necessary information, go through and understand the same before buying any kind of property to avoid paying a huge price in the long run for any decision taken hastily.

Ensure accreditations
If you deem a certain residential or commercial property suitable for purchase, check if the deal would require inspection and do not forget to scrutinize the inspector’s credentials. Beware of non-certified and unauthorized people in the real estate business.

For instance, if the said property needs to be inspected for pest control, then you might want to go through the current pest control policies and ensure that it was performed by an accredited company. This is necessary so that you aren’t held accountable for related issues in future, in case you end up purchasing the property.

Networking Pays
Concentrate on building an honest relationship with real estate brokers or experienced realtors in the industry. This will aid in getting candid opinions whenever you need them the most. Building a strong network will eventually help you find motivated sellers; they are the ones who might be willing to communicate more openly and work out a deal with you readily.

More often than not, property deals are struck only on the basis of right contacts. Hence, more number of people in your network would ensure increased knowledge about great deals and increased level of confidence in dealing with the matters of real estate investing.

Quote a Fair Price
If you find a residential or commercial space that you really like, ask for your realtor’s opinion before you quote the offer. In case you quote a very low price, you might avert the seller from proceeding with the deal. Hence, be fair and avoid offending the seller.

Real Estate Investing is all about patience and building the right knowledge about the real estate industry, which can be achieved only with experience over a considerable period of time. Take the plunge, keep the golden rules at hand and you will definitely reap profits out of your investment decision.

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Real Estate Investing **To Do List**

A well defined crystal clear vision, with objectives and milestones is the foremost basis of any business venture and in Real Estate Investing it is imperative.

Whether it is to grow your business or start-up one, you need to think things through and study all the options available e.g. Wholesaler, Land lord or Rehabber and what you want to focus on.

Once you have decided, you need to set yourself targets of monthly income you would like to generate now and say after one, two and five years of operations.

Break-up each month into number of deals per month to achieve your revenue target. You now need to estimate the leads you need to achieve the desired number of deals. A thumb rule is 20 leads potentially generate one deal.

Draw up a multidimensional Marketing Strategy

Direct mailing – at best averages 4 to 5% leads. Obviously, the attractive or effectiveness of your mailer is the first criteria. Timing, the second criteria is just not related to the Season or holidays but also, prevailing market sentiments. Quality the third criteria, refers to the quality of your mailing list.

Website - set-up a website to collect leads.

Personal Networking - with industry professionals and meeting people not directly connected with your business, by attending seminars or functions, is a definite requirement.

A healthy mix of all possible strategies applicable in your own environment will yield results. Fine tuning to optimize time, effort and positive outcome is an ongoing process. Diligence and consistency are a prerequisite.

A Business Plan

Your business plan is your mapping out of your vision in a professional manner, you need to comply with not only the standard format of presentation but also let your passion and positive qualities show. A Biz Plan would include the following, besides any other aspects:

-  An Executive Summary – normally prepared once all other aspects have been covered.

-  Company Overview

-  Business Model

-  Your USP

-  A Market Analysis

-  Your Business Practices

-  A Marketing Plan

-  Implementation Strategy

-  Financial Plan

-  Assumptions – etc, etc.

A business plan not only requires hard work to prepare, it will perforce make you study all aspects of the business before you take the plunge. It is a great Sales tool and provides an opportunity to your investors and clients to make a favorable impression of your organization.

Executive Summary

Obviously, the most important aspect of your business plan is the Executive Summary. A summary needs to be short precise and cover all the essential points of your business plan. A lender or prospective partner needs to feel the tinge of excitement to be attracted to join your venture.

Real Estate Investing involves many other aspects too:

-  Funding for acquisitions

-  Long Term Revenues – obtaining best market rents with minimal expenses

-  Short Term Revenues – by enhancing profitability of each acquisition

-  Real Estate Market - keeping a sharp eye on market conditions

-  Strategies – to deploy in depressed markets

-  Lease Purchase / Rent-to-own

-   Assignment Contracts

-  Short Sale

-  Investment clubs – which to select, if any

-  Equity or Mortgage – option to follow under changing market conditions

-  Real Estate Investment Trusts – to avoid if Land Lording is not your strong suit

-  Tax angles

-  Financing and real estate leverages

-  Mortgages – various types and their implications

-  Undervalued Real Estate – if you can handle the title issues and renovation at a profit

-  Title issues - etc, etc.

It is clear from above, that besides a good accountant a legal beaver is essential to manage these affairs.

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