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I'd like to briefly summarize real estate investment strategies and the skills you need to succeed in each. Here is a list of the most popular real estate investment strategies: 1. Buy & Hold
2. Fix & Flip
3. Foreclosure
4. Lease Option
5. Commercial/Multi-Family
6. Pre-Foreclosure
7. Probate
8. Rehabbing
9. Seller Financed Notes
10. Short Sales
11. Subject To
12. Tax Lien Certificates
13. Wholesaling
Some of the skills needed for these strategies: 1. Time
2. Money
3. Credit
4. Knowledge
5. Patience
6. Maintenance & Repair Skills
7. Communication Skills
8. Computer Skills
9. Research Skills
10. Organization Skills
11. Networking
12. Short term Strategy
13. Long term Strategies
14. Negotiating Skills We'll briefly go over the first 4 strategies now and the others in succeeding articles
1. Buy & Hold: Buy & Hold is probably the oldest form of real estate investing. Hold a $200,000 property for 30 years and it will be worth over $1,000,000. Buy & Hold gives you Income, Equity, Appreciation, Deductions, Leverage. The rule of 100/10/1 rule applies to find a cash flowing property. (Look at the data on 100properties, make offers on 10 and buy 1). You want to find a property that is below market, rent it out to creditworthy tenants, hold on to it for a long period of time and sell it later at a profit or pass it on to your children. Once you learn how to pick good tenants, being a landlord is fairly easy. MAKE SURE the property cash flows. I am living in my first investment. The one I call "My investment gone bad." Make sure you check the credit of your future tenants and the 2nd to the last landlord for a reference. Always raise the rent every year even if it is only $10. Some of the Skills You Need: Time, Money, Credit, and Knowledge as well as Repair Skills, as well as money for times of vacancy and updating. 2. FIX & FLIP: Similar to rehabbing, fix & flip takes less work because there are minimal repairs/cosmetic work such as new paint and carpet. When this work is finished, the house is put on the market for quick sale and quick profits. You need a network of buyers to sell quickly.
Some of the Skills You Need: Money, Credit, Maintenance & Repair, Networking and Negotiating Skills. 3. PRE-FORECLOSURE & FORECLOSURE:
Pre-foreclosure takes a lot of time. You deal with the banks and they can take months to make a decision. You deal with emotional people in an awful situation and you must be patient to gain their trust. You put a lot of time into many deals and most never close for you. Foreclosure happens when home owners have financial problems and cannot make their house payments. Banks take the property back and put it up for sale through realtors. You have to be very careful because these properties may not be a bargain. Sometimes there are multiple bids and people lose their head and bid more than the property is actually worth!! And then find out that they need to make repairs and buy a new refrigerator and dishwasher. You need: Time, Money, Credit (maybe), and lots of Patience for dealing with bank bureaucracy and the emotional people you will be working with. 4. LEASE OPTION: This strategy is actually about 4 contracts. You acquire a property by offering to rent it for a number of years (1st contract) with an option of buying it at a set price at the end of a period of time, usually 3-5 years (2nd contract) from the seller. Then you find a tenant to rent (3rd contract) the property from you with the option to buy (4th contract) at a set price within a certain period of time. Monthly, the plan is that you are paying the seller less than what the tenant/future buyer is renting for from you and you are pocketing a small profit each month. The tenant usually makes an option payment (down payment) to you as well. When your tenant decides to buy, you will also exercise your option to buy from the original seller. Since you negotiated a lower price with the seller, and a higher price with the tenant/buyer, you make a nice profit. Sometimes your tenant doesn’t buy, forfeiting the option payment and giving you the chance to re-rent the property for a higher price and start the process all over again. Your tenant also takes responsibility for small repairs and maintenance since it will be his house one day.
You need: Time, Money, Credit, lots of knowledge to be able to structure this strategy.
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