Investment strategies for rewards on steroids

Investment Strategies

A lot of people, who’re turning to investment are basically turning to their aspiration of a lifestyle business.

This is why investment strategies for the real estate market are a hot search subject among many of them, who’re looking to actively get involved with investment in real estate on a regular basis.

The reason being that people build more trust in such tangible investments where they’re getting their hands on something real time. People can also understand this investment field a lot better than putting money in bonds and stocks, where many curves pass over their heads and they don’t really know where their money is actually being put.

So let’s outline a couple basic real estate investment strategies that will help you get a grip on this field and make intelligent investment choices. I’ll first tell you what they are then how they ride with the market and the benefits.

#1 : Buy and Hold

This is where you’re buying a property for the purpose of renting it out to a tenant, from whom you take a monthly rent check as payment. So you’re buying and “holding on” to that property, until it develops to a better pricing in terms of capital or you decide to renovate it yourself to a higher capital level.

This strategy is popular because you’re getting a positive cash flow every single month. You also get to develop equity investment savings, that are getting put away bit by bit every month along with your mortgage payments. It’s a decent saving when lumped together.

You also have an easy set of ways to exit out as you can find a better renter, lease this property or even sell it if you get a good deal.

But keep in mind, you do have to be a bit cautious. If you’re in well developed metropolitan areas, the market value of purchase is pretty high and hence your mortgages are pretty high, compared to which the highest point of monthly rent in most markets is not too great. So you have a potential for negative cash flow. You also run risks or falling property values and your renters (god forbid) damaging the property. There’s also the issue of regular maintenance costs, especially when switching tenants.

#2 : Buy and Flip

This is among investment strategies pretty hit on by the media everywhere. In this, you buy a house at or below market value. Then you improve it through legal design additions or just repair and renovate to a higher price. In the next 1 to 3 months, the moment you get a buyer offering you the peak price as per your research for those 3 months, you immediately sell it off. Basically, the longer you keep it with you, the more money you are losing.

Yes, you do need to have a very strong understanding of the economic market around the area and the palates of demographics that are already inhabiting the area. That’ll tell you what money you can spend that’ll cost you the least and give back the most return.

The Buy and Flip tactic requires alert action and good timing. The perfect time to do flipping is when prices of proven property that has a decent record of price fluctuations and high capital growth, have fallen to rock bottom and are just beginning to rise.

A benefit of this strategy is quick capital gains, enabling you to make more frequent transactions and roll out more sales. When cash flow is positive, more sales means increasing profit. the only exit strategy of course is to sell…sell…sell!!

On the other hand, the cost of entry is very very high! Coupled with bulky down-payments and renovation costs. You must keep in mind that this investment is high risk, as for half the period of building up on the value, you’re dependent on external people like contractors and the quality of material supplied.

Buy and Flip does not work well in declining markets. It also requires you to do a lot of running around yourself for improving the state of the property and hence the price it can sell for. Plus there’s the standard difficulty in applying for mortgage as most lenders will never get a chance to extract benefit from you. You’ll be ready to pay them off in 3 months.

#3 : Lease to Own

This investment strategy is the one where you buy a home and then lease it to a tenant instead of renting it out. This is done for a pre-determined price and a well defined amount of time. The ideal way to do this is to have a pre-approved tenant applicant beforehand, having an option agreement or concrete decision on the same in advance.

The exit strategy is again to sell off when you get an optimum price or lease it out to a new tenant who’s paying better and for a longer duration, if the present agreement doesn’t work out.

This investment strategy is excellent as you’re getting instant and ongoing cash-flow – a fat down-payment from the tenant and consistent payments periodically, which includes rents as well as lease credits. Since, it done with a concrete warm buyer at hand, you mostly have a guaranteed sale of lease.

Lease to Own is a low maintenance setup. The person is taking the property as their responsibility during the lease period and they have to worry about any damages before they return it back, not you! There are also no parts of the house that you leave vacant as part of the agreement for leasing, thus they have to pay for the entire house, unlike simply holding property where this rule can be bent.

Also, if the option agreement terminates or the occupant leaves before the period is over, you still get to keep the property, their down-payment and all the principal and rent credits they’ve been paying you. This is a winning situation for you.

Now, please understand that since your option agreement is the sole basis of your going out and fetching them property to occupy, it has to be drafted very accurately. If it’s not and they cause some damage, they’ll be able to walk away without a penalty. And you don’t want that.

Plus, try your best to avoid any doubtful clients for the agreement. Why? Because if they don’t qualify to buy at the end of the option term then you’re in a soup!

#4 : Private Mortgage Investment

This is a hot favorite among moderately experienced investors to those who’re experts with investment strategies.

Let’s say you bought a house for about $90,000 that has potential cost to build in a little better area of about $ 160,000. Then you put $10,00 in to fix up the property. You now have a solid $100,000 put from your pocket. You sell it and offer owner financing. Take from the buyer about 10% or even 20% if you’re a good negotiator. So basically, what you’re getting back is a bit more than your repair cost, or at least the same amount as the repairs.

Next, charge an interest rate of about 10% to 12% on the installments returned to you every period. This means you either get back the original investment and a good interest 5 or 6 years down the line, which is excellent. Or, they’re decided midway that they’re not going in for the complete purchase, in which case you can foreclose for a minimal fee. then, you have the property back and can give it out again with a couple repairs and continue making money until you have your investment back and the occupant has ownership.

The good thing about this is that it relaxes pressure over those looking to buy from you and leaves you in a position of power negotiation when you want to sell, without the risk of losing the property, if the payments aren’t coming in, or getting a lot more than what you invested, if it does successfully sell out. You will not go wrong with this if you’re playing just a little carefully setting your interest rate right.

That said, the world of real estate is out there in the open and you’ll have to implement these investment strategies to get a good hold of them. With time, you will. Good luck!