Posted by: docktohome | October 26, 2010

The “Best” Strategy

Which way is up?

As a newbie to real estate investing I understand how overwhelming it can be when learning about the different investment strategies.  Without experience it is easy for an investor who is just learning to be torn between the successful methods of real estate investing.  Picking one area and mastering it, is often easier said than done.  After personally attending a number of educational seminars that each focused on a different strategy yet all preached they were the best I found myself confused on where to start.  The reason it is important to narrow your focus is because we are more likely to have success once we know a lot about one subject instead of a little about a lot of subjects. 

Those who have been successful using a certain strategy did so by being educated in that area.  Of course they are going to practice what they preach, why else would we want to listen to them.  So as hard as it might be you must choose your path to success and initially stick with one or two strategies.  Learn how to be successful with these strategies and develop a plan to reach your goals. Here are a few of the different approaches; I made a few of my own comments.  Make sure you do your own research before deciding what’s best for you.

Short Sales

Buyers work directly with banks to buy the bank owned properties.  Since these properties are bank owned the opportunity to get them at a discount is high but this can be a tedious and timely procedure and can take ninety days or even longer.  The pay off can be worth the work If you have a network of retail or wholesale buyers.

Wholesales

A person who does whole sales makes their money mostly through assigning contracts.  This individual might work with another individual doing short sales to get the property at a discount and also with a retailer to sell at a profit.  They might get the short sale directly from the bank and do a next day closing for a quick profit of $5k-$15k (depends on the resale profit).

Fix & Flip

A flipper will buy a property that is under value and needs repairs.  What attracts an investor is the amount of profit to be made after repairs.  Having some knowledge in home repairs is beneficial if you’re doing a fix and flip as it can help reduce the cost of the rehab.  Before purchasing the property it is important for the buyer to understand the cost of the necessary repairs while also leaving a margin for the unexpected.  Once the investor has investigated the purchase price, repair costs, and ARV (after repair value) they can determine if a particular investment will yield the return there looking for.

Lease Options

This method is attractive to investors because you can get in for very little of your own money.  When someone signs a lease option contract they are usually doing so because they are unable to get their own financing.  The seller or controller of the lease option contract has given the renter/future buyer an option to purchase the property in the future.  The prospective buyers pay a fee to get into the property and pay above market rent, the extra amount (designated in the contract) can go towards a down payment.  Lease option contracts usually state that if the individual decides not to purchase the property after the designated period of time all fees and additional payments will not be refunded.  Keep in mind this strategy can be win/win for buyers and sellers.

Tax Liens

Tax liens aren’t normally spoken about when discussing real estate investing but they do provide cash flow and can lead to a certificate holder acquiring real estate far below market value.  Along with the other strategies, tax lien investing requires knowledge about effective strategies.  You cannot buy tax liens in every state because some states use deeds, California is a deed state.  A tax lien is placed on a property when the owner has failed to pay the property taxes.  Tax liens take a first position on the property, preceding all other liens.  Lien states have different ways of selling these unpaid taxes, as well as providing different interest rates and redemption periods so it is important to do your research.

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Responses

  1. In this current market I have found that Wholesaling works best right now. Investors that have been around for 15+ years know that this is the time to invest in the market while properties are at all time low’s. Lease options are working great as well because it is a strong renters market because of the fact that it is hard to qualify for a loan. I see you spend a lot of time connecting with real estate professionals. I found that a lot of local RE investors use this site too: http://indianahousehunter.com … Happy networking!

  2. Thanks for taking the time to leave a comment! And yes I am always looking to expand my network and will look further into that website.

  3. This is an amazing and informative website. It is optimistic. It is collective and fair. A real resource.


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