Investment homes and real estate in Orange County, CA
Investment property in Orange County, CA. OC is becoming very popular with real estate investors due to the excellent home prices, great financing, and quality of homes. Many investors are purchasing homes or multi-unit properties to use as rentals, for their children, or for retirement. An investor may choose among many wonderful areas with excellent fundamentals, including schools, shopping, freeway access, employment, recreational opportunities and more. There is ample inventory, including condos, town homes, lots, land, single family homes, income properties and custom estate properties. Prices are great, due to an abundance of motivated sellers, short sales, foreclosures, REOs, and bank owned homes and properties. Home financing and mortgage rates are at their lowest in many years. Home leases and rental properties are in demand in Orange County, CA. Monthly rental prices are excellent and there are many qualified tenants looking for a quality home to lease.
All of this adds up to some great opportunities for the real estate investor. I will be happy to send you sale or lease/rental comparables (comps), current home listings, tax, Mello Roos, or HOA (Home Owners Association) costs, days on market, price reductions, current deals, and information for homes anywhere in Orange County, CA. I can also give you referrals to lenders who will help you qualify for a loan and get you pre-approved -- an essential step to purchasing investment properties.
Orange County, CA home and real estate search pages
If you are handy and looking for a bargain, I
have a new link for fixer-upper homes below. If you are interested in investment property,
or real estate investing in Orange County, CA,
call me to discuss!
E-mail me if you are interested in receiving current MLS listings of bank owned, foreclosure, or short sale properties!
E-mail me if you would like property tax, Mello Roos, or HOA cost information on any property!
Real
Estate Investment Fundamentals
Investing in real estate requires entrepreneurial skills and a vision, which is why not everyone is jumping on the real estate bandwagon. Not everyone is willing to take the additional risk that real-estate investing entails. And these are the same people or renters that will make you rich. The little secret is that there are hundreds of individuals who choose to procrastinate for every one individual who has a vision and chooses to take the risk with investing in real-estate.
Investing in real estate requires a lot of time; you need to deal with a vast array of tenants -- good ones as well as bad. Just like a business, you also have to deal with operating and fixed expenses -- such as heating and electrical bills, as well as renovation costs. On the other hand, the rents keep ticking away 24 hours a day, 7 days a week, whether I'm on the job or not. And those loans keep amortizing. Aside from being your own boss, having the freedom to travel while earning profits, increasing your net worth, and having a place of your own to call home, there are greater benefits of investing in real estate:
1. Cash Flow
Cash is the difference between your income and your
expenses on a piece of property. You can have a
positive or negative cash flow. Obviously, you'll feel
a lot better if the cash flow is positive. Some people
prefer to reduce debt as quickly as possible and
sacrifice a little, and keep a negative or zero cash
flow. My advice on cash flow is this: Never use all of
your positive cash flow with rapid debt reduction. You
will be walking a thin line. By keeping a strong
positive cash flow, you will have more options and
space to maneuver.
2. Appreciation
Appreciation is the increase in value of a property.
There are 2 kinds of appreciation. The first is from
economic conditions beyond your control, such as
inflation. But you wouldn't gain much from this type
of appreciation since the gain is offset by the higher
cost of living. The second kind of appreciation is
market appreciation. This kind of appreciation, you
can control . When you improve a property (through
renovation), you are, in effect, forcing its value
higher. You can purchase a piece of property in need
of repairs and bring it back up to neighborhood
standards or slightly higher. This will give you a
property that is much higher in value.
3. Leverage
Leverage is the ability to borrow a percentage of the
value of a piece of property. Real estate, in
comparison to other investments offers a very high
degree of leverage. In some cases a couple buying a
single-family home can obtain 95% financing. This
allows individuals to purchase real estate with
little, if any, of their own money. What other
investments offer such a high degree of leverage?
4. Amortization
With leverage, or the use of other people's money,
comes a repayment schedule. Your outstanding balance
is being reduced with every payment you make. Part of
each payment goes to interest (applied first), and
part of your payment goes to principal. The principal
reduction is called amortization -- reducing debt
Hence, amortization can make you wealthy -- slowly and
steadily.
5. Tax Advantages
Owning real estate with the goal of making profit
allows you to deduct interest payments and other
expenses come tax time. But, don't be fooled into
buying real estate for the tax advantages; buy real
estate because it makes economic sense to do so.
Owning your own real-estate business is a great way to achieve your financial freedom, but to achieve these goals, an individual needs to understand the fundamentals of real-estate investing. Probably the most important aspect of real-estate investment is the notion of time. A seasoned investor knows that in the real-estate game, there is no "quick buck." Everything comes with time.
The secret isn't money, it's time
Real estate, like a business, is a great form of investing, but it takes a lot of work and time on your part. Especially if, to begin with, your resources are limited. But that's okay because you're going to build your wealth one brick at a time. The first thing you need to spend time on is developing a vision. You need to be specific about what things you want for you and your family. Then you need to ensure that you act on your vision by motivating yourself. What do you want Real Estate to do for you? Spend some time thinking about it because money really isn't enough.
The desire to make a million dollars won't get you going. It is things such as new cars, vacations, improved health, improved housing, and upgrading your lifestyle that will motivate an individual to succeed. The worst thing that you can do -- especially while planning -- is surround yourself with negative people who will trample all over your vision. Once your vision is established, you'll need a game plan to help you reach it effectively.
Have a game plan
Once you realize that unlike the stock market, investing in Real Estate is for the long haul, you can begin to develop your plan of action. Here is a list of the important things that you should consider:
1. Get a good
support team
Don't wait until you have a deal in the works to find
a supporting team. The idea is to get the competent
professionals on your side. And by bringing them
repeat business, you can bargain for better prices.
You need to get the following players on your team:
- Mentor -- Someone who's been in the business for some time now and knows how to smooth out the rough spots, or who can give you wise advice for sticky situations. Maybe even a potential partner.
-
An attorney or
pre-paid legal service-
- Ones that specialize
in real-estate deals are best.
-
Title or Escrow
Co
-- Don't deal with big-name companies; find
one that specializes with real-estate. Make sure
they understand double closings and land
contracts.
-
Insurance Agent
-- Just like the Escrow Co, find one who
specializes in real-estate investors and who
understands land contracts, landlords, and so on.
-
Contractors
-- Always needed for the more complicated
fixer-upper properties. Aim to establish a good
base of reliable contractors.
-
Mortgage Broker
-- Find one who is creative, savvy and experienced
in dealing with real-estate investors.
-
CPA (Certified
Public Accountant)
-- Look for an aggressive
individual who preferably owns investment real
estate himself.
2. Be persistent
Very few deals are made on the first attempt. Most
deals are actually booked by persistent individuals
who follow up with a fifth and sixth attempt. If the
deal is too good to pass up, have a follow-up system
(schedule follow-ups and keep a running history of
conversations). Eventually, you'll come to an
agreement and close the deal.
3. Stay informed
You can lose a lot of money thanks to an investment
mistake. Ignorance can cost you more than what it
would cost to stay informed on new developments within
the real-estate market. Consider attending seminars
every year. You can usually learn something that
either increases your income or prevents you from
landing in trouble.
4. Treat this as a
business
Real-estate investing is a
business
like any
other. It takes a long time to develop customers,
associates, partners, and so on. You need to be
disciplined and professional, and with much effort --
and of course some time -- it will flourish into a
profitable business.
Where do you start?
I personally recommend that a new real-estate investor begin with condos or single-family houses. Why? Because they have the two biggest players in the market. Whereas apartments only have investors playing in the market, single-family homes and condos have both investors and owner-occupants. For this reason, financial institutions feel more comfortable lending a higher percentage of value on the property. Call Me!
Home Investment Strategies
Following are two strategies used by many investors who deal in the single-family home or condominium market. The idea is to take on one at a time and eventually combine several strategies with your investment plan.
1. Buy and Hold Strategy: The starting point for most investors. The goal is to purchase the house with the sole intent of renting it. For this method to be successful, you must purchase under some set price and terms that allow for a healthy, positive cash flow. The rent has to be higher than the mortgage payment.
2. Buy Low-Sell High Strategy (AKA, "Flipping"): Purchase a home located in a neighborhood with high sales activity. Make the necessary cosmetic and structural repairs and then sell the house for a higher price than what you paid. Keep in mind that the purchase price must be low enough to allow room to cover your repair costs, holding costs and resale costs... plus, leave room for a healthy profit. With experience, you may want to seek greater profits by going after properties in foreclosure or REOs (bank owned).
Finally, stop procrastinating and "get in the game"
Don't expect to go through real-estate investing without making any mistakes. Like most businesses there is a learning curve. You will only learn the real-estate game by being active and understanding the buying process. To be successful, you need to learn the market, how to locate property, inspect property, negotiate your deal, contract to buy, finance the purchase, and close the transaction. You can't possible learn all this at once; the only way you'll ever be ready to understand, is by actually going through the motions.
The "1031" tax-deferred exchange. One of your best investor tools!
How would you like to
be able to defer paying capital gains taxes on your
investment properties and keep the money rolling into
new investments? You can do this through the 1031
exchange. A 1031 exchange, also known as a Starker
exchange or a tax-deferred exchange, allows you to
sell investment property and to defer capital gains
and depreciation recapture taxes. This assumes
reinvestment of 100% of the equity into
"like-kind" property (or a combination of
properties) of equal or greater value. Any property
held for investment purposes or for productive use in
a trade or business generally qualifies as "like
kind" property for 1031 exchange purposes.
1031 exchange rules require an investor to identify up
to three potential "replacement investment
properties within 45 days of the close of escrow on
their relinquished property. The acquisition of the
replacement investment property (or properties) must
be successfully completed within 180 days of close of
the relinquished property.
Benefits of a tax-deferred exchange
A 1031 tax-deferred exchange offers strong benefits that translate into investment savings.
-
You can defer Taxes
A 1031 exchange enables you to defer capital gains and depreciation recapture taxes. You can also harvest dormant equity at predictable time intervals with a 1031 exchange to maximize the inherent benefits of your real estate investments.
-
You can Potentially Increase Cash Flow
The tax dollars saved may be maximized to increase cash flow and overall net worth. The compounding effects of leveraging the equity in investment properties over several holding periods can potentially produce higher actual dollar returns, new depreciation schedules to tax shelter cash flow, and accelerate equity accumulation.
