If you're reading this article, you may be serious about building wealth through real estate or you may just want to explore the core concepts further. Regardless, we thank you for visiting OfferMarket, and we hope you find the ideas presented in this article to be insightful, actionable, valuable and worthy of the time you've taken from your busy day.

 

Our mission at OfferMarket is to empower you to build wealth through real estate. To do this, we provide real estate investors with [off market investment property deal flow](https://www.offermarket.us/listings), [fix & flip loans and DSCR rental loans](https://www.offermarket.us/loans), [fix & flip insurance and landlord insurance](https://www.offermarket.us/insurance), and tools and insights to build knowledge and expertise.

 

## Why invest in real estate?

 

Asking why is a powerful way to learn. These are the reasons why people invest in real estate:

 

**Income**

 

Real estate generates rental income. Whether it's a single family rental or a self-storage facility, people pay to use real estate. If the rent they pay is high enough to cover the ongoing expenses to finance, manage and maintain the property, then the property generates cash flow that can be used by its owners for any manner of activity, including buying more real estate!

 
 
**Asset appreciation**

 

Real estate values tend to go up over time. It's important to proactively protect real estate using cost effective maintenance, disciplined management and [insurance](https://www.offermarket.us/insurance).

 

**Inflation protection**

 

One important basis for valuing real estate is replacement cost. Over time, as building material and labor becomes more expensive, it becomes more expensive to build houses. Homebuilders therefore need to charge higher prices for new homes. This serves as a driver for price appreciation of existing homes. 

 

In most real estate markets, where there is not excess supply or low demand from renters, landlords have the ability to increase rent at a faster pace than inflation. Using the income approach to [valuing real estate](https://www.wallstreetoasis.com/resources/financial-modeling/real-estate-financial-analysis), as rental income increases, so too does the price an investor is willing to pay for the property. For example, if a single family home generated $1,000 per month in rent in 2010 and $1,500 per month in rent in 2020. In 2010 that property may have conservatively been worth $100,000 in 2010 and $150,000 in 2020.

 

Owning real property sure beats having cash sit in a bank account, and it performs better during periods of high inflation other asset classes.

 

**Tax efficiency**

 

While the property is generating income and increasing in value, it is also depreciating. The roof may need to be replaced every 25 years, the floors may need to be replaced every 30 years, the furnace may need to be replaced every 15 years. For this reason, the IRS allows real estate investors to depreciate the value of their house (not the land value) over 27.5 years. 

 

If you are financing your investment property with a mortgage, you are racking up thousands of dollars per year in interest expense.

 

On an ongoing basis, your investment property requires maintenance. Let's say your dishwasher needs to be replaced, or your house needs to be painted. Capital improvements such as a kitchen or bathroom remodel may also be required to keep your property in good condition and optimize rental income.

 

Depreciation expense, interest expense, maintenance expense, and capital improvements offsets rental income and reduces or even eliminates taxable income.

 

If you sell real estate, you can do a 1031 like kind exchange and use the proceeds of the sale to purchase a new investment property. This allows you to defer capital gains tax indefinitely while you hold the new real estate.

 

## 4 Pillars Of Real Estate Investing

 

**1. Compounding**

 

The value of a high quality asset over time will compound. We met a gentleman who bought a 5 story brownstone in New York City for $100,000 in 1975. That property is worth over $5,000,000 today and generates over $12,000 in monthly income.

 

Compounding takes time so you need to be disciplined to hold the asset and not sell in fear when prices go down or greed when prices go up.

 

As Warren Buffett famously said "*price is what you pay, value is what you get*". Buffett's teacher, Ben Graham, once said "*In the short run, the market is a voting machine, but in the long run, it is a weighing machine*.”

 

**2. Location**

 

Location, location, location. You've heard this saying countless times. When investing in real estate, you need to truly understand the local market. Here are some things that great real estate investors consider:

 

- Population growth
- Economic development
- Major employers
- Major industries
- Median income
- Market rent
- Market rent growth
- Poverty rate
- Housing inventory
- Developable land
- Developer activity
- Historical home price appreciation
- Owner occupied housing rate
- Crime
- Tax rate
- Public school ratings

 

**3. Valuation**

 

Understanding the above points will allow you to understand the risks of owning real estate in a given market. Recognizing asymmetric risk will save you from making the mistakes of buying at all or buying at the wrong price.

 

**4. Financing**

 

Like most infrastructure, real estate is highly capital intensive. Properly structuring your real estate investments will allow you to acquire real estate, optimize its cash flow, and avoid the risks of excess leverage.

 

## How Jon Gray Invests In Real Estate

 

<iframe width="560" height="315" src="https://www.youtube.com/embed/UKkykksZHOU" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

 
 

## How Sam Zell Invests In Real Estate

 

<iframe width="560" height="315" src="https://www.youtube.com/embed/ryn5nXFEE8w" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

Investing in real estate is an incredibly powerful way to build wealth and achieve financial independence. Learn how to invest in real estate.

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How To Invest In Real Estate | OfferMarket

How To Invest In Real Estate

## Does it make sense to sell a house without repairs?

 

Selling a house in poor condition may seem counterintuitive. You might be thinking but I want to maximize my sale price, shouldn't I spend money repairing the property? Or don't homebuyers want to buy a turnkey property?

 

Across multiple recent surveys, a majority of prospective homebuyers are interested in saving money by buying fixer uppers. Perhaps this doesn't come as a surprise, but mainstream television has glorified the DIY fixer upper approach to home remodeling. Millennials, with more energy and student debt than other generations are most interested in this approach.

 

The objective, therefore, is not to maximize the sale price in gross terms. The objective is to maximize the sale price while minimizing the capital (i.e. cash) needed to achieve that sale price. That is to say, you need to carefully evaluate the return on invested capital when considering repairing a home or investment property before selling. If you do this properly, you will find that it often makes financial sense to sell a home in poor condition.

 

Let's take a look at an example. If you have a $100,000 property in poor condition and you can invest $100,000 to bring the ARV (after repair value) to $250,000, it might be tempting to move forward with the rehab project in pursuit of that $50,000 in forced equity. Before you do, here are the things you should be considering:​

 

## Market condition

Is it a seller's market where demand from buyers is outpacing the supply of housing inventory? Or is it a buyer's market where homes are selling below list price and sitting for long periods of time?

 

## Neighborhood

Do homes often sell for $250,000 in this neighborhood, or is $250,000 a stretch and unlikely to achieve no matter how much patience you have leaving the home on the market?

 

## Project requirements

Do you have the right team to successfully complete the project in a timely and cost effective manner? How sure are you that you can conduct the renovation quickly and within your budget?

 

## Which improvements pay off?

Most home improvements deliver less in added home value than their cost. That is to say for every $1 you spend, you are likely to get less than $1 in added home value. It's important to choose your repairs wisely.

 

We would love to provide you with a table of estimated home improvement payback percentages but the truth is that home repairs and renovations are incredibly subjective to the local market, cost of labor, cost of material, and home specifications. For example, adding a second bathroom to a 4 bedroom house is going to have significantly higher payoff than re-doing the single bathroom in said house. Are you following us?

 

## What should you do before selling your house? 

 

Selling a home in poor condition and avoiding expensive projects doesn't mean you should not do anything before selling your home.

 

## Roof leaks

Make sure your roof is not leaking. Patch the leaks, prime and paint water stains. Buyers don't want to deal with active leaks. It raises concerns about immediate cash needed beyond down payment and closing costs. Notice we are not saying you need to replace your entire roof.

 

## Bathrooms

Re-caulk the tub and clean the tiles. Give buyers a clean slate. No one wants to inherit your mildew, moldy caulking.

 

## Plumbing and HVAC

Make sure these systems are in working order, again avoid replacement.

 

## Professional cleaning and photography

Before going on a date you dress up and make an effort to look your best, but you don't necessarily go out and spend thousands on clothing, jewelry and plastic surgery. The same holds true for intelligent, effective home selling.

 

## To give your property the best chance of finding love, we recommend the following:

 

- "deep clean" the interior
- power wash the exterior
- 25 professional photos
- Matterport 3D walkthrough
- virtual staging

 

All of the above should run you less than $2,000.

 

## Make it clear you are selling the property as-is

This means you are not making any representations or warranties about the condition of the property and you are not going to fix things that are discovered during the inspection.

 

## How does selling AS IS compare to fixing up before selling?

 

| Comparison | As Is | Traditional |
|:-------------------------------------:|:-------------------------:|:-------------------------:|
| Listing price point | More attractive to buyers | Less attractive to buyers |
| Investment required (% of home value) | 0 - 2% | 1% - 10%+ |
| Time to sell | Fast | Slow |
| Hassle | Low | High |

 

* Comparison data presented in the above table is based on national averages and estimates. 

 

## Sell AS IS with OfferMarket

 

OfferMarket is an AS IS real estate marketplace. We believe you should be able to sell your home AS IS and receive competitive offers. Our streamlined transaction flow and proprietary listing distribution technology targets thousands of qualified buyers and makes them compete for your home. 

## How it works:

**1. Create free listing.**
Set your terms, launch your campaign.

**2. Make buyers compete.**
Once we have a critical mass of interested and pre-qualified buyers (typically within 2 weeks), we will coordinate a Safe Showing. You will typically receive multiple competitive offers within 24 hours of your Safe Showing.

**3. Review offers: accept or reject**
If you accept an offer, we send our contract to you and the buyer and introduce you to our title company for closing.

**4. Close your sale.**
Buyers on OfferMarket are carefully qualified and expected to close within 30 days of offer acceptance.

Selling a house in poor condition? This guide shows how to do it fast and profitably, considering value and ROI.

Selling A House In Poor Condition

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