5 Rock-Solid Real Estate Investment Strategies
By Peter Dobler
Investing in real estate is more complex than simply buying and
selling homes. To help new real estate investors to decide which strategy might work for them I put together 5
rock-solid strategies. It is up to you which strategy you feel more comfortable
with.
1. Buy and Hold
This real estate investment strategy is commonly known as rental
properties. Becoming a landlord is easier than you think. You buy a
property, you advertise it as “for rent” and you sign a contract with your new
tenant. That’s where the love story ends. You need to know a lot about your
duties and your rights as a landlord or you will find yourself in
trouble.
Screening your prospect tenants is your first line of defense. Protecting
your property from damage is your first duty. I might paint a little bit dark
picture of being a landlord. But dealing with tenants can be the most
frustrating job you ever had. Do yourself a favor and visit a bookstore or library and get as many books on landlording as you
can get. Armed with this knowledge you will be able to create a positive cash
flow and a long term relationship with your tenants every time you put the “For
Rent” sign in the yard.
With the buy and hold strategy you basically
have 3 income streams going at once.
Amortization; while paying your mortgage you also lower the amount you
owe.
Appreciation; while owning the property it
increases in value.
Tax incentive; as a landlord you will be
able to deduct your investment cost over several years. (See you tax advisor for
professional advice).
Based on this information you can easily see
that even if the rent doesn’t cover 100 % of your mortgage payment you will
still be able to create a positive cash flow.
2. Flipping
This is the art of “buying” and “selling” real estate investment without actually
taking ownership. In a flip situation real estate contracts get assigned and the
person who assigns the contract to someone else typically gets a commission for
their services. That’s how you can make money with real estate without credit
checks or no money down. Because you never take possession of the property, you
don’t need to apply for a mortgage.
You only need 2 things to be able to flip a
home. First, you need to find an attractive property that will sell very
quickly. Second, you need to find a buyer within a
very short period of time. Typically 2-3 weeks. Then you simply flip the contract to the new
buyer and you will collect your commission at a so called “double
closing”.
This sounds complicated at first, but with a
little bit practice you will be able to create a nice income from this. By the
way, this is the preferred concept of most real estate “gurus” who appear in
late night infomercials.
3. Rehabs
Rehabs are the most risky form of real
estate investments. You hunt for a cheap, run-down property and you hope that
your preliminary remodel cost estimates will leave enough room for a nice profit. Well that’s the theory. Most
real estate investors are failing with this type of strategy.
You either didn’t get the property cheap
enough to make a profit or the damages are more extensive than estimated which
will offset the cheap purchase price. To make matters worst. If during the rehab
phase of typically 3-4 months the market is going south all bets are off. Trust
me, I made my share of experiences with this and I told myself, never
again.
4. Commercial Real Estate
Investment
What comes to your mind first when you think
of commercial real estate investment? Big factory complexes, shopping malls or
maybe huge office buildings. Well, my answer is much simpler. Anything bigger
than a 4 unit apartment building, some call it fourplex, is considered commercial. The great thing
with commercial real estate is that the value of the property is determined by
the rent income it generates and not by how crazy people are going with bidding
on residential real estate.
Theoretically there’s no such thing as
sellers or buyers market for commercial real estate. I wrote a complete article
about the pros and cons of commercial real estate. So I keep this brief.
Personally I love commercial real estate. Of course, commercial real estate is
more or less off limits for beginners, because commercial real estate lenders
want to see some form of prior experience in real estate investments. However,
if you got some experience, go for it. As an added benefit; the competition is
far less.
5. New Construction
This is the most affordable and easiest way
of real estate investment. Getting into the earliest phase possible of a new
development is a sure thing to make money. Keep an eye on the market and you
will be able to sell your new home before construction is finished. The
construction companies don’t like this, so they limit the number
of homes an individual can buy. Even so, keep one or two homes constantly under
construction and you will make some nice profits. Of course this works only in a
sellers market. Stay away from this strategy in a buyers market or when you see
big changes in the local real estate market.Sincerely,
Peter Dobler
(c) 2005
Peter Dobler is a 20+ year veteran in the IT
business. He is an active Real Estate Investor and a successful Internet
business owner. Learn more about real estate investments at
http://www.suncoastrenttoown.com or send a blank email to
mailto:suncoastrenttoown@getresponse.com |
