FINALLY… The name of the sailboat I just spent a week aboard in the Virgin Islands. It takes teamwork and a smart captain to handle the ocean and its temperament. There was “rollers” (high waves) and definitely a sense of being off balance as the boat rocked to the side and I held on tight. Experience, a willingness to learn everyday and a childlike wonder made it a safe and fun voyage. I did have to take out the acupressure sea sick bracelets and managed to safely navigate getting in and out of the dinghy on all thse shore trips.
Sailing is not much different than real estate investing. If only it was easy, then everyone would be doing it or whatever the quickest way to make money to live the life of their dreams. To make good money in real estate you likely need some expertise and it is even easier if you also have some capital. Though I know many people who have made it on just a shoestring, myself included. Let’s face it, this is a business, it can be done on the side, part-time or become a full time career.
The 3 Best Strategies for Real Estate Investing are:
1. Buy A Property – Fix it up and add value – Sell at a profit
This works if you can find a great deal, maybe a distressed property. In today’s market though inventory across the US is low, particularly in starter homes. Thus, it can be difficult to find a good deal on a property. Multiple offers are extremely common, even on properties that need repair. So, it can be a challenge to find a great deal. You need an experienced Realtor that understands rehab to help in calculating the numbers. In addition, you need experience in figuring out the ARV – After Repair Value.
If you are buying a rehab property, the cost of repairs and labor are not the only cost. In addition you must budget for holding costs. These include closing costs, utility costs, the cost of funds be it bank or private money, and the cost of the taxes while you are working on the project. Then add the actual labor and materials. And the biggest mistake I see happen, is the investor fails to build in the profit.
Most first time flippers go over budget on the rehab and over on the time to get the job done. So be sure you add all the costs, plan for profits and allow for overruns. If there is still money left, then do the deal.
2. Buy A Property – Fix it up – Hold the property as a rental
This strategy is similar to above it has all the risks of rehab. The good news is there is another option on the back side. Keep the property and rent it. Now, this has challenges also. The big
one is property management. I have seen many a tender hearted person fail at property management. It’s tough to be nice and get the rent payment. Remember, this is a business and must be operated as one. Rent is due on the first of the month, no exceptions.
Hopefully you know how to figure out the cash flow analysis on a property. This is a formula that any investor should be familiar with. It comprises of the rental income and then subtract the expense. Don’t forget a vacancy factor and maintenance expense, along with taxes and insurance, and of course property management fee the standard is 10%.
3. Buy Turnkey Rentals already a tenant and is cash flowing
By far, the easiest method and quickest to a cash return on investment.. This doesn’t need your time or your skills. Turnkey rentals are the only way to do hands off real estate investing. Be careful and make sure that the company you work with on turkeys is reliable, has experience and most importantly is managing the property in house. They should have a track record of supplying turnkey properties to investors. No matter which of these strategies you choose…there is work and lots of details to make sure you are handling the business of real estate investing to your greatest return. Some of the details are: .. protecting your investment with the proper insurance, inspections, financing, title companies, closings, screening tenants, picking the right ones, move ins, managing getting paid by those tenants, and finding an attorney, do you form an LLC and tax accountant to handle your investing. This can be very overwhelming, make sure you are working with professionals to guide you through these choices so your investing becomes a passive activity.
In real estate investing there are even more ways to make money or lose money.