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#1 Wholesaling
This is the easiest point of entry for the majority of the investors, as it requires the least amount of capital. You find a property owner who wants to sell and find a buyer for that property on “as is” condition without the fixing part to try and get the market value higher. After the property has been sold, you’ll get a cut on the sale. Basically, you are the intermediary that builds a buyers list to locate undervalued properties using a multi-pronged approach. This relies heavily on how good and how broad your real estate network is.
#2 Fix and Flip
You don’t have to be an avid real estate investor to know what fix and flip is. Anyone who has cable and passed by HGTV has a basic idea of what it is. You buy a house below the average market value, renovate it, and sell for a profit! This is one of the most widely used real estate investment strategies used around the country.
Keys to fix and flip investing success:
· Prepare yourself by understanding how to locate under-market valued properties in the right locations.
· Understand values-make sure you are comparing apples to apples and going with the highest comp when doing our due diligence as a conservative approach.
· Align yourself with multiple capable and competitively priced renovation contractors to not only give you a bid prior to purchasing the home, but also to deliver as agreed upon.
· Understand how far to go with finishes and layout changes to keep within the budget and comps in the area.
· Stay away from potential losers such as foundation issues and bad floor plans.
· Have a sales strategy in place prior to the purchase that accounts for commissions, closing costs, holding costs, etc.
Contrary to “reality” real estate shows, getting rich doesn’t happen overnight. The longer it takes to flip the property, the more expenses you incur for maintaining it while waiting for a buyer. Working with getting coached by or partnering with a seasoned investor is a huge advantage, as you learn best practices and pitfalls to avoid, which only years of experience can provide.
#3 Rentals
In a normal rental property scenario, you have a tenant who is essentially paying the rent in exchange for living privileges. If you bought a rental property with a mortgage, your loan will eventually cancel itself out over time. Why? The rent you receive from your tenant is basically used to pay the loan, which is increasing your equity in the property. The money left over is your cash flow divided by the amount you put down to come up with your CAP rate. This is a GREAT way to build long-term wealth.
For those who are new in the game, cash flow is basically the income you get from your investment property (usually rental properties). This is a major factor in generating a high return for your investments and savings. Once you increase cash flow by accumulating properties, you can plan your income and determine the course of future investments.
Housekeeping
Also, you’ll see a lot of tax benefits when it comes to real estate investments. Consult your CPA to see how you can depreciate properties that you are holding onto for rental income and also discuss with them acceleration methods used to front load depreciation to give you more capital to buy more and keep building your portfolio.
The answer to how long it’s going to take, as you might’ve guessed already, is up to you. Your real estate skill set, determination, experience, and risk management are major players in this ballgame. It’s all about how smart you invest in the industry. If you do your due diligence and play your cards right, you’ll one day realize that you’ve gained a considerable amount of wealth already.
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Ray Martin
Ray Martin, Ray Martin Stratford, Ray Martin Easton, Ray Martin Connecticut, Ray Martin Real Estate, Martin Caselli