3 Most Common Real Estate Investing Stategies

This article gives practical tips on <a target='_blank' href='http://www.superiorpropertiesgroup.biz'>Real Estate</a> <a target='_blank' href='http://www.alchemyinvestmentsgroup.biz'>Investing</a> strategies for beginners. If you are interested in <a target='_blank' href='http://www.superiorpropertiesgroup.biz'>Real Estate</a>, this is a good article. I had no idea about the 3rd type of strategy!

For those of you that have an interest in Real Estate and are looking at the various ways to get started, I am going to go over the 3 most common real estate Investing strategies used to dive into real estate.  This is not a comprehensive list by any means, but it will give you an idea of how most people get their start.  I will break down the 3 most common real estate Investing strategies and explain it to the best of my knowledge.

3 Most Common  Real Estate Investing Strategies

Flipping– also called buy and sell.  This strategy is very popular and most people have probably heard of it.  There are tons of TV shows where people buy a foreclosed property that needs work, they renovate and re-list the property usually in a very short time frame.

Essentially flippers buy houses well below market value so they have enough money to fix them up and sell them for prices comparable to other houses in the neighborhood. They buy foreclosed homes, home from tax auctions, foreclosure auctions or straight from the seller.  These investors are looking to make a significant profit in a very short period of time.

Most of these investors try to resell the property in a month to earn a large lump sum of cash up front.  They then move on to the next property and keep going along this path of flipping houses for profit.  I you haven’t heard of this real estate investing strategy, just watch some HGTV and you will see it.

Renting-also called buy and hold.  Another one of the most common real estate investment strategies out there.  This is the type of investing that we do.  You buy a property and you rent it out to someone else.  The beauty of getting started in rental units is that there are so many ways to get started with rental units. It is really a wonderful thing. Hear me out.

Most people are concerned about starting real estate investing because they don’t have the money to invest. There are ways you can invest with low to no money down. You just have to be creative.  I did a post recently on how to finance your first investment property so that may help you out if you need some ideas.  but for now I want to give you some ideas on how to start in the rental business.

If you are young and don’t mind moving around a bit, consider buying a duplex (2 unit building) or triplex (3 unit building) and live in one unit. Find tenants to live in the other unit(s). They essentially can help you pay the mortgage on that property.  Since you are living in the property, you may only need to put 5% down since you will be living in the property.

You can also save up the extra cash flow from the property for a down payment on your next investment property.  Another great part of real estate investment strategies is that they are very versatile.  You can live for free and use the extra cash flow from the property for future investments.  Can I get an AMEN!

The great thing about rental investing is you have the monthly cash flow (rent) and you still have the investment, which is the house/building. If you buy low enough, you will have appreciation of the property so when you do to sell, you not only made monthly income in rent, but you will also make money from the increase in value from the property.  What a nice bonus, huh?

This article gives practical tips on real estate investing strategies for beginners. If you are interested in real estate, this is a good article. I had no idea about the 3rd type of strategy!

Wholesale investing– This is one of the real estate investing strategies that I had never heard of until I started listening to Bigger Pockets Podcasts.  They are amazing by the way.  I love listening to other investors talk about their real estate investing strategies because there aren’t any that are the same.  Okay, back to wholesaling.

Essentially wholesalers find deals for other investors, get the house under contract and sell or assign the property to another investor. This is kind of complex to understand, but basically these people get creative at trying to find houses that may go into foreclosure before they even get to that point.

Stick with me here. I am going to try to explain this a little better. So basically, wholesalers work as scouts. They are the people out there looking for run down houses in good neighborhoods and sending mail to these houses asking the owner if they want to sell their house.

They also may put signs up along the side of the road with something like “Are you looking to sell your house quick? If so, call this number…”

These are marketing tactics to find real estate deals before they hit the general market for all investors to see. These wholesalers then compile a short list of buyers (flippers) who might want to buy a house at a good deal to flip.

Wholesalers fees will vary, but one statistic that I read indicated that wholesalers will generally make between $5,000 to $10,000 per deal. They find the deal, negotiate with the owner and then add $5,000 to the price when trying to sell or assign the house to the another investor.  I have heard stories where they have made more than that per deal also.  Can you imagine doing multiple deals in one month?

So what is the benefit to all of this work you ask? You don’t need a lot of money to get started in this type of investing. You may need to put down 10% of the money needed upfront, but you will get that money back and then some and it may only take a couple of days if you know an investor who is looking for a property.

Investors who flip often have a way to find cash and close on these deals with their wholesalers quickly.  I am talking around 15 days or less.  Wholesalers generally have a short list of go to buyers in mind when getting a house under contract.  They know what their investors like and they find these deals for them.

There are tons of other ways to be involved in real estate investing.  Crowdfunding deals is becoming popular now.  You basically put up some money and you get a return on it once the investor can refinance the property or sell.  There are also ways to put your money in as a private investor.  So if you have a friend who wants to get into real estate and they ask you for money towards the deal, you can put in money and make money.  You agree upon the percentage you make back from your investment.  Like I said, there are tons of ways to get into real estate.

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If you are interested in jumping into real estate, just get to know your area in which you want to invest and talk to someone who has been investing for a while.  Ask them which real estates investment strategies they have used.  If they have been in the game long enough, they likely have done several.  Ask them which real estate investing strategies they liked the best and the least.

Go over the good and the bad of real estate investing with them.  Know what strategy you want to start with and just go for it.  Review your deal with your investor friend to see what they think.  Partner with a seasoned investor.  There are tons of ways to get into investing, you just have to start if you are interested.

Source: http://simplyintentionallife.com/3-common-real-estate-investing-stategies/

HOW TO MAKE MONEY INVESTING IN REAL ESTATE

Many people believe that the way to making money in Real Estate is to focus on the rising housing prices. But actually, with a bit of extensive research, you can make decent money with a long-term investment property piece.

The key to doing so is understanding the true income you will receive from a property once you have deducted all possible expenses. So you must look at the property, current and potential tenants, and the market. Then, if the property value rises or not, it won’t be a determining factor if you make a profit. Here are a few tips on how you can make money Investing in Real Estate.

RECREATIONAL PROPERTIES MAY BE TOO EXPENSIVE

As a quick note, some believe that Investing in recreational properties is a great way to make money in Real Estate. Think of how many people vacation during the year, for no special occasion.

However, you need to think about the entire costs of a recreational property. You must keep the property up and if it’s not near your home, you may want to hire a property manager. You must look at the operational costs such as utility expenses and purchasing equipment. For large stand-alone properties, you may need a storage shed to keep tools and equipment out of the way and a small riding mower. For most, the expenses outweigh that of a primary home.

LOOKING AT CHEAP PROPERTIES VERSUS PROPERTIES IN DEMAND

Your initial instinct may tell you to find a relatively cheap property to invest in. However, this is a smart standard practice Investing in the stock market, not real estate, unless you are looking to flip a property. You see, real estate is comprised of so many factors, and although pricing is one of them, you need to consider what renters want.

One thing that makes a property expensive and valuable is its location. You need to consider the economic development surrounding it. You want to purchase a property where there is substantial job growth as well as gross domestic product (GDP) growth. In doing so, you know that the renters you get not only depend on your property, but also are able to afford it. This generates a long-term demand for your property.

Other demands you must accommodate in finding the perfect residential investment property include the actual population of the area and its accessibility to transportation. You are going to fill the needs of renters, so having your property in an area with grocery stores, businesses, and plenty of highway or public transportation options will fill your units.

MAKE SURE YOUR PROPERTY GENERATES A POSITIVE CASH FLOW

The investment property you purchase should generate a positive cash flow, otherwise, this is not a sustainable investment for you. Before purchasing, sit down and calculate what your rental income will be and consider all your expenses such as covering your mortgage loan, property taxes and insurance, vacant units, and repair costs. It’s hard to determine what the expenses will be though. You can always ask the seller, but remember that they are trying to make a sale. The numbers more than likely will be deflated.

WEED OUT THE FAKE RENTERS OF THE PROPERTY

A common tactic of sellers is to make their property seem golden which means you must do a bit of legwork before trusting the information a seller discloses. You don’t want to purchase a property expecting to bring in more rental income than it can actually generate.

The seller can provide to you a rent roll that lists how much rent each unit provides. Now what you then need to do is check out the local rental listings online or in your local paper to see what the average rent is for similar units in the area. The Canadian Mortgage and Housing Corporation publish a rental market report.

As you compare the numbers, and you will want to see that the rent is either average or lower than the local average so that you know you have a good investment piece. You may even have room to raise your rent. But, if you have a few units that are renting for a few hundred more than the local average, you may need to dig deeper into the rental history of the units. These could very well be family members or associates of the property owner that will vacate the property once you have purchased it.

VACANCIES CAN MAKE OR BREAK A DEAL

Having access to the full rental history can give you a good idea of the income the property generates. Now, if every unit is full and there is a waiting list, you have likely found yourself a near solid investment. Now there are a few things to be cautious of.

First off, every landlord is going to have a bad tenant or two. So, as there are wait-listed potential tenants lined up to move in, you may have bad debts with a prior tenant to settle. You need to calculate that into your future expenses as it can and will happen again.

Maybe one particular unit continues to have a broken lease. It’s time to discover why. Something is making the tenants unhappy and the prior landlord may not have deemed it as a necessary expense. But everything is necessary when it comes to keeping your tenants happy. You never want to calculate your rental income based off full occupancy for those reasons.

Also, a unit could need a month or longer for maintenance repairs before a new tenant moves in. That is a month of no income for one unit alone. Then, you must calculate in the expenses of advertising and upgrades for the unit to rehab it and make it a desirable unit again.

Always deduct about 5% of the income to offset any unexpected losses. You could offset the loss with other amenities you can offer other tenants or the public. For instance, if you have covered parking, you could rent those spaces out.

A FEW EXPENSES TO BE ON THE WATCH FOR

So aside from your upfront-expected expenses, there are others to take into account as previously mentioned. If this is a large unit and you have other obligations, you may want to consider hiring a property manager or firm. They are able to rent your units, oversee the maintenance, handle inquiries, and keep all record keeping activities up to date and in order.

The other large chunk of expenses would be for maintenance and repair. Always verify what is going on with the property before purchasing.You can spend hundreds on a small condo a year, so just imagine the expenses on a larger unit such as a town-home. Have a professional property inspector come out and perform a complete audit. They can tell you about furnaces that may need to be replaced in the near future, roofing, plumbing, and electrical issues. If something has been hidden and you don’t catch it, you could pay thousands in repair and replacement costs, making it a bad investment choice.

As for property taxes and insurance on the property, you must also be careful. Make sure to review what the property was last assessed at and that you are not overpaying. Once you purchase the building, this could trigger an audit and a new assessment. That could increase your taxes.

The building may also be insured, but that does not mean it’s adequately covered. So have an audit performed by your insurance agent to see if you need to add more coverage and add that cost.

IF YOU ARE A BEGINNER, DON’T GO AT IT ALONE

If you are interested in investing in real estate, but a bit nervous or short on cash, you can still do so by teaming up with others. Many people form investment groups, which help lessen the burden felt on one person. Your risks are spread throughout the group. You also have greater success at investing in more properties, diversifying your portfolio.

Another great way to ensure you are investing wisely is to consult with a chartered accountant (CA). A CA can prove to be very beneficial for beginning or seasoned investors. They help advise you as an individual or as a group about the finances involved in the purchase. They also advise you on how to set up your organizational structure.

Your CA can help identify expenses and potential savings and earnings on an investment property to be claimed on your taxes. They will identify deductibles such as your mortgage interest, maintenance, Property Management fees, insurance, and professional fees. They will help you create the perfect record keeping system so you can easily recall this information for your accountant.

As you can see, many minor details make a major impact on selecting the perfect investment property. With a bit of due diligence on your end and a great Realtor or investment team, you can earn a passive and lucrative income from real estate.

 

Source: http://www.frugalmomeh.com/2015/04/how-to-make-money-investing-in-real-estate.html

15 Tips for Breaking into Real Estate Investing


Real Estate Investing may seem like a risky business, and it can be, but just about anyone who works hard enough and smart enough can use Real Estate Investing as a lucrative way to increase their net worth.

Retirement based on cash flow streams from rental income properties is a very real possibility.

Before you get started in Investing, though, there are several things you will want to take into consideration, to determine which property would be the best investment for your personal financial situation.

If you’re considering getting started with Real Estate investing, consider these fifteen tips for breaking into real estate investing.

1) Look for a good investment

So what is a good real estate investment? A good real estate investment is any real estate property that increases your net worth through a fair rate of return on your equity.

2) Buy cash flow-positive properties

When looking for an investment property, you need to calculate the estimated cash returns on the property for that area to make sure you’ll be getting a good deal.

3) Buy a property that you love

Real estate ownership takes a lot of time and effort. It’s a lot easier to part with time and money on a property you’re fond of.

4) Go from personal residence to rental

A great way to get your feet wet with real estate investments is to put your personal property up for rent. If you plan to live in a house for a few years before turning it into an investment property, you’ll be better equipped to handle repairs on the house. Living in a property and making changes along the way is a cost-effective, long-term solution for getting started in real estate. You’ll also get better interest rates on the property if it’s your primary residence when you buy it.

5) Don’t buy fixer uppers

Fixer uppers are tempting to purchase as a real estate investment because of their lower price point on the market. When looking for a rental property, though, unless you plan to live in the fixer upper first, it’s much more cost-effective simply to buy a solid, reliable home that needs little to no repairs.

6) Overestimate your costs

Things perpetually break down and need repairs in properties, and the home repairs inevitably cost more than you think they will. If you’re looking into real estate investing, make sure you have a fairly sizable cash reserve to cover the expected and unexpected costs of Property Management and repair.

7) Buy in working class areas

Look for properties in working class areas where rental properties don’t last long on the market. For example, if you live in the city, look for a property that would appeal to young graduate students or young workers.

You’re more likely to have your property sit vacant, costing you thousands of dollars if you buy in a neighborhood typically occupied by homeowners. It’s not impossible to rent homes out in nicer neighborhoods, but it’s easier to fill a property with tenants where rental properties have a higher turnaround rate.

8) Pick moderately priced properties

Keep in mind that expensive homes in sought after areas like the ocean front usually have low cash flow returns. You’d be better off investing in a more moderately priced property with a higher cash return.

9) Know the neighborhood

Don’t buy a property in an area you’re not familiar with. Know the history of the neighborhood, and do your research. Find out how the schools rank, what the crime statistics are, and if there is any noise or air pollution that could affect your ability to rent out the property.

10) Buy local

Unless you plan on hiring a property manager, take the travel distance into consideration when looking for a real estate investment property. Sometimes you can go months without having to make repairs or visit the property, but other times you’ll be at the property every day that week. It’s a lot easier to manage a property that is close to home.

11) Buy a one bedroom apartment

There will always be people looking for a one bedroom apartment. College students, bachelors, widows, and single working class people all usually look for a one bedroom unit, since it’s the most affordable housing option. People don’t like to pay for more house than they need.

12) Learn from the experts

If you’re looking at getting started with real estate investing, reach out to the experts in your community. Join a real estate investing Club and reach out to experts online. Invite a local broker to lunch and pick their brain for ideas on your tab. If you want to be successful with real estate investing, surround yourself with successful real estate investors.

Also, constantly read new real estate books, blogs, and eBooks about smart real estate investing strategies.

13) Hope for the best, plan for the worst

When you own a property, it’s essential that you hope for the best but plan for the worst. Between expensive repairs and downturns in the market, you need to have a backup plan and money in savings to help cover life’s unexpected financial difficulties.

14) Plan on long-term investments

The longer you own the property, the greater your return will be. Don’t hop in and out of property ownership. A little bit of patience goes a long way to increasing your returns.

15) Don’t quit your day job just yet

It seems like common sense, but too many real estate investors have gone belly-up with their finances because they relied too heavily on turn around profit or rental streams of income, and then the market took a downturn, leaving them with not enough cash flow to cover their income needs. Until and unless you have enough diversity in your real estate investments to cover downturns in the market or tenants who don’t pay their rent, you’ll need to keep working your day job.

Stay on top of your investments

Real estate investing can be a rewarding and profitable business endeavor, but it can years for your property or properties to become reliable income streams. Make sure you’re getting a good deal on your investment property and that the property is increasing your net worth.

Do the research, know the area, and ask for help from those in your community that have had success. Once you do make a decision on a property, prepare for when things go wrong, and have cash saved to cover the high cost of repairs or expenses. Stay on top of the market, and educate yourself so that you’ll feel more confident with your investment strategy.

Source: http://www.youngadultmoney.com/2015/12/18/15-tips-for-breaking-into-real-estate-investing/