The Real Estate Strategies that Work
There are couple of real estate strategies that every well-informed investor knows. These can vary, depending on the situation and people involved. Some strategies require lots of money to start and others require no money to get started.
By knowing these real estate strategies you can get excellent results from your investments. There are endless strategies when it comes to real estate investing. You should study each of the techniques listed below to become a successful real estate investor.
Rentals
One of the best ways to create passive income is rental properties. This is one of the best and oldest real estate strategies. The downside is you are going to need good credit or access to investors to get this strategy going.
For example, you purchase a property for $100,000. With a mortgage, you will need a 20% down payment to avoid PMI costs (Private Mortgage Insurance). That means you will need $20,000 for your initial payment and your mortgage will be for $80,000 plus interest.
If you continue to rent your property out and use your rental income to pay your mortgage, you will eventually reach a point where you paid your investment property off and you are now making the full rent as profit.
This very effective technique can be duplicated. You can even use the equity in your initial investment property to get the down payment for another property.
Flipping Houses
Everyone has heard a story of someone who “flips” a house for a healthy profit. Flipping a house can be costly and/or time-consuming if you do not have the right team in place. Flippers will often use a combination of people, including a construction team, real estate agents, and investors.
When flipping houses you want to look for homes in nice neighborhoods. The key to this strategy is to find a house that is listed below market value. Once you find a house that meets this criterion, you would then remodel it to increase the chance of it selling for a high market value.
You are looking for houses that look vacant or outdated. The best flipping scenario is a home that requires no major repairs. Cosmetics repairs are ideal, such as carpet or paint. Curb appeal is another cosmetic factor that affects your property’s value.
You are looking for homes that are slightly neglected. A new paint job and landscaping can make a home sell much quicker. The best part of this strategy is your payments come in large sums and, if you are using an investors’ money, you have an infinite ROI (return on investment).
Wholesale Houses
This is one of the easiest ways to get into real estate. Flippers are constantly looking for homes that are selling for less than market value. By gathering this info for them, you save them a lot of time. You make your profit by adding a slight finder’s fee onto each property. This fee is usually under $2000.
The best part about this technique is it doesn’t require you to have any startup capital. You just need to know a flipper and where and what they are looking for in the properties they flip.
This is a great technique if you live in a hot real estate market. When you have investors that want to get into your market, you have a great opportunity to make money.
Lease Option
A lease option is a great way to gain control of a property without ownership. The reason you would want to do this is that you can begin to make a profit from the property before you own it. Perceptive real estate investors use lease options to acquire properties with little to no money down.
Making sure you can re-let and/or resell the property, gives you an excellent window of time to make cash flow as well as capital gains. Lease option investors will often look for flippers that cannot sell their property for whatever reason.
The key to this strategy is finding a motivated seller. You are looking for someone who considers his or her property a burden for whatever reason. This would be someone in a financial bind or it could be someone who inherited a property.
The perfect scenario is a homeowner that does not want the financial or physical responsibility of their home. Mastering lease options will improve your other investment strategies because it can be used in conjunction with the techniques mentioned before.
Land Development
This is a high level of real estate investment. You really need to understand your market to get into land development. This type of strategy will often require multiple investors working together to achieve a common goal.
You will have the vision to be able to look at a field and see a new development. Not just mentally see it, but mathematically envision it.
You will need to understand the cost of doing business vs. your true potential profit. At this level of real estate investment, you should already have a dependable team that you have worked with before.
You should examine your area, your network, and your finances and decide what strategy is best for you. There are many times when you will use multiple techniques, such as lease optioning a house then using it as a rental property.
The goal is to understand these strategies well enough to see the profit margins in each technique at each property. This will help you to determine what strategy provides the highest ROI. Start learning today!
