Real estate investing is not a get rich scheme. It takes dedication, training, and good data. InvestorCompsOnline specializing in helping you get the training you need to be successful and provides you with the accurate data you need to valuate a deal.
Typical real estate investment can be broken down into three areas of investing. Let’s review these opportunities so that you can determine which best fits your interest and budget.
The first category of real estate investing is “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. However, that’s where many investors say 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. Know who you are getting and what their previous Landlords think of them. Just a little leg work in the beginning will protect your property from damage in the end.
Now, I don’t mean to paint a dark picture of being a landlord. But dealing with tenants can sometimes be a frustrating job if you don’t do your homework in advance. 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 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 typically 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).
2. Now let’s consider a different category that often gets a bad “rap” due to previous misuse by investors. Flipping/Wholesaling.
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.
3. Finally, let’s discuss Rehabs. Rehabs are the most risky form of real estate investments. You hunt for a cheap property in need of repair and you hope that your preliminary remodel cost estimates will leave enough room for a nice profit.
You have to factor in the costs of holding on to the property (taxes, utility bills), repairs the need to be done, and selling fees to the realtors (usually 6%). So the house needs to be a great deal to create an investment opportunity especially in this market where prices are still going south. You should be specifically looking for foreclosures or HUD homes which are usually priced below their value but may need major repairs.
Review these strategies and determine which is right for your financial goals and desires. Whichever strategy you choose, remember you must do your research with your InvestorCompsOnline account to determine the property’s value. It is not possible to be successful in real estate with out good comps and the knowledge to understand the data.