The #1 auction web site on the internet, EBay is known as the place to go to sell your unwanted stuff. It’s also a good place to go to get a good deal on a variety of different items. However, what many people don’t recognize is that EBay is also a great place to go to purchase real estate. There are a number of different properties available for sale right on the EBay web site. Some of these properties can be acquired at significant discounts. EBay has a real estate section on its web site located at http://realestate.ebay.com. On this section of the web site you can buy and sell a variety of different types of real estate property. So how does the property selling process work on EBay? The seller creates a listing on the EBay web site where he or she describes the property that is for sale. The listing includes a brief description of the property and includes some pictures and other related information. Properties are sold in auction format, similar to the format that many items are sold on EBay. The seller determines the minimum price for the property and includes it in the auction listing. Once the auction is created, the auction starts and buyers are able to bid on the property. Potential buyers bid the maximum amount they wish to pay for the property. The system automatically increases your bid based on what other buyers have bided until your maximum bid amount is reached. For example, suppose the minimum bid is $1000. The maximum you wish to pay for the property is $10,000. You put in $10,000 as your maximum bid. The system will automatically submit a bid for $1000 for you since you are the first person that bided on the property. You would be the high bidder with a bid of $1000. If another purchaser comes along and places a maximum bid of $5000, you maximum bid of $10,000 exceeds their maximum bid of $5000. The system would automatically increase your bid to $5000 so that you can match the maximum bid of the purchaser that tried to outbid you. The auction continues for a certain fixed duration of time. During this time duration potential buyers may place bids on the property at any given point in time. If they place a bid that exceeds the highest bid made by the previous high bidder, the new purchaser takes over as the high bidder with a bid that equals the highest bid the other person was willing to pay. Once the auction has concluded, the purchaser with the highest bid at the end of the auction is declared the winner of the auction. The winner of the auction is now able to go into contract with the property owner to complete the sale. With the large majority of items that are sold on EBay, once you bid on the item, if you win the auction you are now contractually obligated to complete the purchase. Failure to complete the purchase is considered a breech in contract on EBay, which carries penalties that could include a loss of privileges when using the EBay web site. Real Estate is different. Bidding on a property on EBay is not considered a contractual obligation. The reason why EBay handles real estate different from the sale of other items is because real estate purchases are highly regulated from state to state. Therefore a purchaser cannot be committed to the purchase of a real estate property until they execute a binding contract with the seller based on the laws and regulations of the state that the property is located in. Once the buyer wins the auction the next step is to make contact with the seller to execute the contract. The seller signs the contracts and sends the buyer the contracts. The buyer reviews the contracts, signs them and sends the contracts back to the seller. Once the contract is executed the next step is for the buyer to secure financing if necessary. Some property prices on EBay are so low the seller can pay for them with all cash, get a personal loan or pay for the property using a credit card. If the property is of a higher price where these types of financing tactics are not practical, the buyer has a certain amount of time to secure a mortgage for the property. It is also during this time that the seller may do all due diligence necessary prior to closing on the property. Some properties may require work to be done on the property. This is the opportunity for the buyer to bring contractors in for a work estimate, perform any type of inspections on the property and complete other forms of due diligence. When buying property on EBay outside of your home state it is important that prior to bidding on property you do your research on market values in the area. You want to make sure that you are not overpaying for the property you purchase. One way you can do this is to contact a real estate agent in the area. An agent can tell you what the approximate after repair value is on the property. An agent can also tell you what type of rent you can expect per month from the property as well. As part of your due diligence on the property, you should also make sure that you have an appraisal done on the property. This will confirm your assumptions about the overall property value and make sure that you have enough value in the property to make the type of money you want to make on the property. The last thing you want to do is to go ahead and close on the property only to find out that the property isn’t worth what you thought the property was going to be worth. This will kill your overall profits and could potentially turn what you thought was a winning deal into a losing and unprofitable real estate transaction. Prior to completing the purchase you need to figure out what your exit strategy is going to be. Your strategy is going to be dependent on the price you are paying for the property and what needs to be done to maximize the profit potential. For example, if the property is purchased for significantly below market value and needs repairs, you need to identify how much it is going to cost to complete the repairs. This cost should be factored into your overall property analysis. You then need to figure out how you plan on realizing your profit after the repairs are completed. One strategy you can take is to simply flip the property to an investor in the local area. Some of the property values on EBay are so low that you can literally pay cash and close on the property. Once this is done, you simply turn around and aggressively market the property for a price above what you paid, but still low enough for the investor to realize profit. The investor purchases the property from you and you realize the difference between your price and their price. In some cases you can literally double your investment just by utilizing this strategy. A second strategy is to rehab the property and then sell it on the open market. You can hire contractors to complete the work for you. You can then turn around and resell the property on the open market at a price much higher than what you paid for the property and your expenses. If you are able to secure the property for a price well below market value and secure a good bid from contractors for the work done, you can turn around and sell the property for significantly more than what you invested into the property. It is not unheard of for an investor to triple his or her investment utilizing a rehab strategy on EBay. A third strategy is to rehab the property and then hold on to the property for cash flow. There are two ways you can turn the property into a cash flow producing property as part of your overall investing portfolio. Either one of these strategies will allow you to begin earning a monthly passive cash flow from your real estate investment. The first way you can hold on to the property is to simply become a landlord and rent the property out to tenants. Ideally the amount of rent you are able to collect on the property should be worth the amount of money you invested into the property. If you paid all cash for the property, I recommend that you stick to investing in properties in which the cash flow you are able to collect exceeds the amount you invested into the property after a maximum of 24 months. The cash flow is the profit you have left over after you collect rent and pay any expenses related to the property. Potential expenses include utilities if the tenant isn’t responsible for those, as well as potentially a management fee. If you are investing in properties out of state you will need to hire a property management company to mange the property for you. By sticking to this rule, this means after two years, you will make all of your money back and every month after that is completely profit. If you borrow money to secure the property, I recommend that you stick to investing in properties in which there is a positive cash flow. This means that after paying all costs related to holding the property and paying your monthly finance payments, there is still a profit left over to go into your pocket every month. What type of money can you make with a strategy like this? One investor purchased property in Ohio for $2000. The property was worth $40,000 after repairs and the estimates came in at $10,000. The property would rent for $500 a month. A successful rehab would yield $28,000 in equity. Financing the property and renting it out would yield a passive cash flow of $100 to $200 a month. This type of profit is waiting for you all by investing on EBay!
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