Making money out of property

in making a profit off them and this week I wish to continue with the discussion by pointing out techniques and tactics of how to make money off real estate.
We have set for ourselves an audacious target that could earn anything from US$100 000 to over a million depending on the time, effort and initial investment one is willing to put in this.
In my previous article I focused mainly on three types of properties the potential investor should look at, which are discount properties where a buyer buys property at a discount.
The others were distressed properties where the seller is distressed for various reasons and conversion properties, which are those properties that are ripe for conversion to another use thus significantly increasing their value.
I emphasised that the serious investor spends their time searching for such properties, either personally or through a team of professionals.
Once found, then one can move forward to the next step of our investment process.
For the reader who did not manage to read my article last week, we have termed the process “property recycling” for we intend to identify a property, buy low, add value then sell high.
The bottom line of real estate investment is finding deals, funding deals and flipping them.
In layman terms this is simply finding the best property for the least price, finding a way to fund the purchase of the property and marketing and selling off the property quickly at a profit.
This in most cases will also involve addition of value on the property, especially where a dilapidated house is in issue.
It is worth stating that the rate of return on value added has an exponential relation to the actual value added the high the value addition, the higher the return.
It is prudent that the first time investor restrict themselves to a new investor zones in a certain area, give or take a 70km radius and focus on the properties in that area to allow themselves to have intrinsic knowledge of that area.
One should also look at those properties that are easier to sell, rent or mortgage.
By zoning in on an area, you are guaranteed that within the area, there will be at least five bargain properties and the prospective investor should always be the first one there.
With enough time spent trading in properties in that area, one will eventually know the demand in the area, the rough price guide vis-a-vis the amount that should be spent on the property and the demand in relation to property use in such areas.
The next step will probably be the most critical, because it requires one to find a motivated seller.
A motivated seller is one who is open to different offers because of various extraneous reasons, which I intend to list, others may call such sellers “desperate”.
Some of the reasons for motivated sellers are bad management, money problems, out of work, out of money or out of luck, illness, inheritance or ignorance, area in decline, attorney problems, estate or probate problems, emergency or early retirement, divorce, death, debts or dissolution of partnerships.
There are numerous other reasons for motivated sellers, it is the investor’s job to fish them out and meet their need.
The prudent investor does not scrounge off the misfortune of others, but looks for ways to create a win-win solution with the motivated seller.
The next question is obvious, how would one find out about these motivated sellers?
There are the conventional ways of finding out, which are for example your classified ads, a common example will be one property being sold by many realtors, this most often is a sign that the seller is motivated to sell and is open to offers.
Circle the properties in your classified ads that seem flexible and follow up on them.
Real estates are also a good place to start, the realtor is in most cases is well versed with the flexibility of the seller and is best suited to advise on offers that can be accepted.
One could also use other sources, like friends and contacts, banks, courts, investment clubs, professionals like accountants and lawyers or whatever other mode that will give an edge over other investors in the market at any given time.
After a careful assessment, choose the property that you feel will give you the most return on investment, remember that you do not want a problem property, what you want is the perfect investment property owned by people with problems.
l Vengai Madzima is a property consultant and analyst with Wisdom Properties. He can be contacted on 0772 468093 email: [email protected]