Get Answers To Your Most Common Real Estate Investment Questions
Whatever questions you may have, now and throughout your real estate investment journey, you can be sure that we’ll provide you with the answers, insights, and connections that you’ll need to take your next successful step.
All Skystone associates maintain active real estate and/or broker licenses. Additionally, each associate engages in ongoing training, studies, and licensure. Our associates have extensive experience and engage in numerous real estate transactions each month. As such, they can be counted on to provide you with support and guidance even if you engage in high-risk/high-reward real estate investments.
Skystone Acquisitions provides investment properties at discounted prices, allowing you the opportunity to secure attractive returns-on-investment. Our “Buyer’s List” offers you early access to these properties without the need for you to scour Zillow, For Sale by Owners, or the endless emails from random sources.
The questions and answers that you find below pertain to typical investment properties offered by Skystone Acquisitions and are not intended to be all-encompassing and for all situations. There is no guarantee in real estate investing and we do not promise you will achieve successful results even when following the advice of agents, brokers, other real estate investors, or Skystone’s associates.
Every real estate investor interprets information and manages their investment properties in ways that are unique to them. As such, while we are happy to provide useful information, investment opportunities and industry contacts, we cannot guarantee your success.
What do I need to do before I get into real estate investing?
You’ll want to secure enough capital before you even begin searching for your first real estate investment property. Most of our clients arrange for at least $30,000 to secure and ensure a smooth closing for a property that meets their criteria.
Many people believe that the best way to start investing in real estate is to buy books, attend seminars, or take classes. While outside education can be informative, it’s often too general to be useful in your specific market and for your unique investment opportunity. Experience is your best education. Only by buying and selling your first properties will you discover your strengths and what you can best capitalize on and what parts of the process you prefer to delegate.
What is the difference between a “wholesale” property and a “distressed” property?
Wholesale properties are investment-grade real estate opportunities that you can buy, repair, or remodel and then sell to capture attractive financial returns. Wholesale properties are not usually sold or marketed to the general public.
Distressed properties are generally considered “in need of some form or repair,” and as such, are sold below fair-market value. In some situations, the owner of the property is forced to liquidate quickly by selling below-market pricing.
Skystone Acquisitions markets exclusively in wholesale/distressed properties and offers these properties only to our list of investment buyers.
Once you purchase a Skystone listed property, you are free to perform as much or as little rehab to the property as you desire and then sell your property on the retail market. Or, you can choose to keep your property and offer it for rent to generate a constant monthly income.
What type of discount can I expect on wholesale properties?
Most of our Skystone clients enjoy discounted property prices in the range of 20% to 70% off retail market rates. Our whole purpose is to provide real estate investors like you with high-probability investments that yield substantial returns. The real estate investment market does fluctuate, however, and experienced investors know not to overbid on potential properties. That’s why we provide our clients with discounted properties at a set price. The set price alleviates the property’s investment potential from being erased by escalating bids.
Where can I find information on available distressed, discounted properties?
There are many sources available to you, and you should consider all of them and the benefits of each.
While local real estate agents are often considered a good source, many agents are not accustomed to working with investors and may not understand the unique objective of a quick flip.
You may also consider signing a contract with a marketing techniques company that promotes real estate investment seminars. These seminars have a poor track-record for most investors and they are incredibly expensive while offering no guarantee of success.
Skystone Acquisitions, however, provides the expertise, the listings, and no-membership contracts to our clients. This allows investors like you to maximize your time, your abilities, and your financial resources to pursue exceptional investment returns.
How do I know if a property is the right fit for my goals?
Every investor has different goals and strategies that comes along with experience. However, you don’t have to rely solely on yourself to make this decision. Skystone associates provide you with a detailed packet including similar recently sold properties. Our price is based on this information and the repairs needed for the subject property to reach market value. Where the inexperienced real estate investor may take weeks or longer to decide on a particular property, the experienced investor makes the decision in a matter of minutes based on the numbers. The difference between these two types of investors comes down to market knowledge, access to a proven list of vendors, and having financing pre-established.
Before buying a property, you should always do your own independent research and make your decision based on multiple sources. Skystone Acquisitions is a good source for local market knowledge, a proven and vetted list of qualified vendors, and help in arranging financing so you can invest like an experienced professional from day one.
How should I approach evaluating a property?
When you engage in evaluating an investment property, you should keep in mind your unique goals, ability to manage risk, and the amount of money and time you are willing to invest to achieve your stated goals. Then, consider these next six steps:
1) Determine your exit strategy (buy/fix/sell, buy/fix/rent, or creative financing).
2) Determine the ARV based on comparable properties.
3) Determine the rehab costs to bring the property up to desired ARV or rent-ready status.
4) Determine the expected days on market based on comparable properties and market conditions.
5) Consider potential risks that may limit your upside (i.e. proximity to commercial, nonconforming property, located in flood plain, etc.).
6) Determine your expected net profit and return.
A Skystone associate will be happy to assist you in evaluating your next investment property. Feel free to give us a call or visit our offices.
Can I do my own inspections?
Of course! We encourage you to make as many inspections on a potential investment property as you like. You are welcome to bring your own general contractor to inspect the property, however, utilities will typically not be turned on. Investors who are successful at purchasing properties through Skystone have their teams in place prior to looking for their next deal, enabling them to move quickly when a new property becomes available. If you require a professional, licensed inspector to provide an in-depth, photo-illustrated report of the property, you should not purchase in the wholesale market. All properties offered by Skystone are provided on a first come basis and once contracted, you will not be entitled to a due diligence period or inspection contingency. All inspections will need to be preformed prior to contracting.
Buying wholesale property carries multiple risks you must evaluate prior to purchasing. Typically, wholesale properties need reconstruction and remodeling to achieve your desired results. Any time construction is involved, there’s a possibility of missing a substantial defect in the property which can greatly affect the repair costs, after repair value, and overall marketability of the property.
Does traditional bank financing cover purchases of wholesale properties?
Usually, no. Most banks have processes in place that can take 30 or more days to close. Purchasing wholesale properties typically requires a much faster closing. Additionally, banks often put in place certain contingencies such as property inspections and repairs before they commit to a loan.
Can I negotiate the price on a wholesale property?
To offer properties on a first come basis, Skystone Acquisitions has a policy of pre-setting the price and not negotiating on it. Most sellers in hot markets call for highest and best making it very difficult to ever get a deal. Often, inexperienced investors will get emotional in multiple offer situations and bid the price much too high. At Skystone, you don’t have to worry about wasting countless hours inspecting properties and writing up contracts that will never get accepted. The price you see on our property listing is the price we will take from the first investor.
What do I do about needed repairs?
Getting repairs done right the first time and at the right price can mean the difference between making significant returns or, perhaps, none at all. That’s why successful real estate investment professionals have a team in place consisting of a general contractor, backup general contractor, designer, and a handful of subcontractors.
General contractors come in many shapes and sizes. Finding one you can trust and effectively manage is key to your success in real estate investing. Once found, they can be a great resource to you—accompanying you to properties, providing repair estimates, and informing you of potential issues that may surface once construction begins. It is a wise practice to ask general contractors for a list of recent references and to confirm they have the proper insurance/license needed for the job.
Getting multiple bids and creating a detailed budget and scope of work are great practices to implement. Often, investors will go way over budget because they didn’t take the time initially to create a thorough budget to strictly follow. Having a general contractor or experienced mentor to assist you in this is key to your success at achieving your expected return. Poor management of contractors is one of the most common reasons investors fail to make a profit.
What is the process for buying a property through Skystone Acquisitions?
The first step is to have an in-office meeting with a Skystone associate. In this meeting, our primary goal is to assist you in building a specific investment profile so we can begin searching for the right deal for you. In addition, our associate will inform you of the full sales process and what to expect from our company. You will receive take-home information about how the transaction works and you will receive a copy of our standard purchase contract so you have plenty of time to get comfortable with the terms before you ever visit a property.
Our properties are discounted and sell very fast, so the in-office meeting is an opportunity for you to ask any questions you may have and learn everything about our process before you start looking at deals. By meeting with one of our associates first, it will give us a better understanding of your investment goals and what types of properties to send you. After the meeting, we will begin sending you properties for you to evaluate.
How in depth is the research performed on wholesale properties when they are offered by Skystone?
The associates at Skystone Acquisitions excel at finding attractive investment opportunities for our clients. The first step is determining a cost estimate to rehab the property up to a target after repair value or rental grade. Once a rehab estimate is complete, we will set a price we believe the property will sell for.
Our estimates are general guidelines and should be confirmed by a professional that will be managing the repairs. Costs can be difficult to predict as the market for materials and labor fluctuates. Also, each investor has their own experience level and teams in place which makes it nearly impossible for us to predict the exact costs for you specifically. However, we are constantly learning to stay up to date with current labor and material costs in each market, which enables us to accurately price properties in the wholesale market.
The after repair value of a property can also be difficult to predict. The quality of construction performed, design choice, and fluctuations in supply/demand in the neighborhood have major impacts on the success of selling at the targeted price in the expected time on market. It is important to remember that investing in real estate carries a high-risk/high-reward and the occasional failure should be expected even for the most experienced investor.
Why do I need Skystone? Can’t I find discounted properties myself?
This idea may sound appealing initially, but after you factor in the amount of time and money it takes to find discounted properties, you will probably think twice. We have built proprietary technology and have established systems that allow us to be a leading supplier of investment real estate. If we spent our time managing rehab projects, we would not have the time do this. The same goes for you, if you plan on rehabbing investment property, you likely will not have the time to find your own deals. By no means are you limited to only purchasing properties through Skystone. We understand you need to have multiple sources to keep your pipeline of inventory full.
How do I know if I’m getting a “good deal?”
Whether a property is a good deal or not is subjective to each individual investor. Some investors have a minimum dollar amount they want to profit on a flip while others seek a target return on their investment. Either strategy is fine, you need to judge this yourself.
Before buying any investment-grade property it is essential for you to understand your objective and goals. You can then apply your objectives to the property listings that we provide to you so that you are able to determine which of our properties match your goals.
Skystone associates will provide you with a packet containing recently sold and pending properties similar to the subject property; however, it is your obligation to confirm this information based on your own, independent research.
QUESTIONS ABOUT “BUY/FIX/SELL” PROPERTIES
What is the “buy/fix/sell” strategy?
The “buy/fix/sell” strategy is when you buy a real estate property on the wholesale market, conduct repairs to add value to it, and then sell that property on the retail market.
What are the risks involved with the “buy/fix/sell” strategy?
All investments carry a certain amount of risk. Some of the most common risks involved in a “buy/fix/sell” strategy are fluctuations in supply/demand of housing in the neighborhood, incorrect estimation of repair costs, project going over scheduled timeline, and general contractors walking off the job or stealing your money. All real estate investing is risky, but this particular strategy is one of the riskiest.
How long does the average “buy/fix/sell” take?
Generally, the average “buy/fix/sell” takes about 90-120 days from purchase to resale. Larger projects, such as large additions or new construction, can take up to 6-12+ months. It’s important to be conservative with the expected timeline and to budget for additional time needed when evaluating the deal.
QUESTIONS ABOUT “BUY/FIX/RENT” PROPERTIES
What is the “buy/fix/rent” strategy?
Unlike the “buy/fix/sell” strategy where the objective is to realize a quick profit, the “buy/fix/rent” variation seeks to obtain long-term gains in both income and property appreciation. The exit strategy here is to retain the asset and rent it out for cash flow. It is a common opinion amongst investors that cash flow is key to long-term wealth building.
What are the short-term and long-term goals of the “buy/fix/rent” strategy?
Typically, an investor who follows the “buy/fix/rent” strategy is out to capture both immediate (short-term) recurring revenue in the form of monthly cash flow, as well as equity appreciation from both the upgrades they perform and the increasing property values (long-term).
What risks should I be aware of with a “buy/fix/rent” strategy?
Many of the risks you’ll encounter in the “buy/fix/rent” strategy are the same risks that you’ll find when purchasing an investment property to fix/flip. These may include: market changes, falling home prices, and issues with repairs, contractors, and vendors.
Tenant-related issues bring additional risks that you should be aware of with the buy/fix/rent strategy. Tenants can become a liability if they get injured on your property because it’s not safe. Landlords should always be aware of local safety requirements and implement safety precautions on their property. Also, landlords can face the risk of tenants damaging the property or failing to pay rent. In this case, litigation may be needed to evict the tenant, which adds additional legal fees and ceases cash flow on that property. Due to these risks, it’s very important to screen and interview potential tenants before signing a lease agreement. Managing a rental can become time-consuming and add extra headaches, which is why we recommend hiring a property management company to relieve those burdens. When done right, a rental can be a great way to achieve positive cash flow.
What are the best types of properties for a “buy/fix/rent” strategy?
Your unique objectives and goals as well as the amount you have available to invest will help you find a good investment rental property. Additional considerations should include area occupancy rates, proximity to schools and shopping, the amount of parking, and the amenities on property that will attract more desirable tenants. A good range for buy/fix/rent property is commonly thought of to be between $80,000 and $250,000 after repair value.
Who qualifies the tenants on a “buy/fix/rent” property?
You have several options available to you when qualifying potential tenants. Some of our investor clients prefer to manage this aspect themselves. Other investors prefer to delegate this task to an experienced real estate agent, or a retained property management company.
How long does it take to get the property leased from purchase?
You may find a rental property that already has pre-existing renters. In this instance, you want to make sure they are quality tenants who pay on time and do not damage the property. Other times you may choose to invest in a property that requires some repairs before it’s ready for occupancy. It should take around 30 days to find a tenant after the property is move-in ready. The length of the process relies heavily on the demand for rental properties in the surrounding area.
If you find a specific property that you are considering purchasing, feel free to contact a Skystone associate who can help you estimate the costs and the time required to get the property move-in ready.