Lacing up the Training Wheels for the New Investor

Saint Charles, IL –
In some ways, jumping into property investing in the Fox Valley area is a lot like learning to rollerblade.  Both require a sense of adventure, both favor a narrow path on which to tread before landing in the tulips and both reward balance over speed.  If you don’t have balance, all the speed in the world won’t help you.  So, how does one prepare to buy property for investment?  Grab your roller skates (which are an oldfashioned, slower version of rollerblades), find your knee pads and helmets, and brace yourself, it may be a bumpy ride.

The first plunge is always too steep
With a plunger in one hand and a toolbox in the other, a new property investor can expect to roll through a lot of issues on their half pipe learning curve.   More often than they like to admit, whipping out their personal checkbook will solve matters but also drain profits.  Along the way, they’ll learn why a property is on the market and the ick factor associated mold, broken water pipes or defective septic systems.   Their  “To Do List” includes hiring a dumpster bigger than most garages to gut a home.  They will have a list of local handymen and various helpers, including electricians, locksmiths, window repairmen, plumbers, roofers, and 588-2300 in speed dial.  They also learn that no matter how good their first deal seems, experience will prove them wrong.  New investors hope they have a soft landing in the tulips when they go down, but too often end up in the thorn bushes.

Paved roads are smoother
A tip for all new investors is to leverage all your available resources and that means both on and offline.  Let someone else do the heavy work of breaking ground, remodeling an old dump or driving around endlessly searching for the best deals.  Buyer’s agents are already out in the field, culling the prospective houses on their own gas and time.  They are actively involved in the local market and they know something about investors:  even seasoned property investors need to get rid of a property every now and then.

Property investors occasionally need to liquidate or sell one property to free up cash to purchase another.  Oftentimes, this means selling a perfectly good rental property, fully rented and ready to go, and a new buyer can benefit from the built-in lease.  Owner financing can help even more, especially for new investors looking to make a deal work by skipping a conventional mortgage.  Does such a deal exist?  Actually, yes.

Saint Charles has such a deal this week:  at 905 Indiana Ave.

http://www.zillow.com/homedetails/905-Indiana-Ave-Saint-Charles-IL-60174/4659848_zpid/

Inside the Saint Charles market
Here is where a buyer’s agent has knowledge that the newbie can access.  The MLS database that agents use shows all the past home prices for the area (from yesterday to 7+ years ago, in fact).  The market history indicates that most properties under the $100K price point in Saint Charles are rare.  Usually the best ones that hit the market below $100K will be snapped up in all-cash deals, in record time, under multiple bids.  The remaining stragglers are typically properties with major defects and are ignored by the best trained investors as too much hassle.  New investors are too wobbly to handle foundation issues, expensive septic systems, running new underground lines or removing asbestos.

In the end, there are very few homes for sale in Saint Charles that are fully rented, on the market, with owner financing such as this one at 905 Indiana Ave.  A seasoned investor dismisses such properties because their profit margin is too low.  But, it can be the ideal property to purchase for a first time investor/house flipper to get your foot in the door.

Here’s why:
Better financing – An owner-financed deal will help the new buyer to purchase a property with different financing terms vs a typical bank loan.
Better knowledge – The current owner will have experience with the property and know the recent issues.  Many diligent property owners keep receipts of repairs and will know what to expect in up keep.
Turnkey rental – An tenanted property means the current owner has done the heavy lifting for you, saving you time and money to find, check and approve a new tenant.
Rental rates – There may be some wiggle room in the monthly rental rate from what is currently being charged.  Knowing the current rent range for the area is key to keeping pace.

Finally, seasoned investors are a storehouse of information and may even share some of their experiences with a fresh investor.  Having someone who has skimmed down the path before you can shave years of time off your learning curve and save thousands of dollars along the way.  Many investors work creative deals with the same end goal in mind: buy more property.  Now, a new investor can too.

Tricks on training wheels
Here’s a favorite tip for finding those “owner financed” hidden gems.  It won’t work on Zillow, Trulia or Realtor.com.  Ask your preferred buyer’s agent to run a search on the MLS for key words “owner financing, special financing, or owner assistance”.  Agents often put these key words into the listing sheets for “eyes only” fellow agents to find under agent comments/listing remarks.  Listing remarks rarely make it to the public eye for viewing on sites like Trulia or Zillow and they don’t have a search feature robust enough to sort for it.

When you’re ready to lace up those training wheels, and find a great investment in the beautiful Fox Valley, give me a call at 630-854-4360 or email me at Jennifer@ElginFoxValley.com

Jennifer Kinzle, e-Pro, Broker
Charles Rutenberg Realty

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