If someone tells you that real estate investing is a quick and effortless way to make a lot of money, your best bet is to walk away and avoid further eye contact. However, a savvy investor who is willing to perform their due diligence will be able to invest wisely. With that in mind, it is possible to plan for the economic recovery provided you have some solid Investing Strategies and adhere to them.
And while it is tough to gauge the real estate market at any given time, a good strategy helps you to stick to your plan and avoid getting sidetracked. Depending on your risk averseness, liquidity and schedule a few silos of investment opportunities are always available. Among the most robust are as follows:
Buy and hold – Investing Strategies
Big land buy and hold is essentially a tactic for people with significant reserves because it takes a great deal of vision and is an exceptionally long-term gamble. Think of the vacant land around a city as fallow field or greenfield if you like. A sleepy town that looks as though it will always remain so can seem like a bad investment. However, the folks who played the long game on the waterfront district in Portland, Oregon have cashed in. The years of waiting paid off.
Buy and hold is still a solid tactic when you consider that whenever one purchases a house or a condo, this is essentially what they are doing. It has been said that owning a house is like having a big piggybank, you pay your mortgage and watch your home value accrue.
People having a decent amount of disposable income often find themselves thinking about buying a rental property. And while owning rental units does entail its share of headaches it tends to be, overall, a worthwhile investment strategy for parking your money. Not only does the value of your units accrue, but you also draw a steady stream of income while it is doing so.
Rental units, be they duplexes, triplexes or larger are also a popular technique for people who want to be a resident landlord. There are several aspects to this approach that make it a good bet. First, the tenants pay the mortgage. Second, the owner is on hand to effect repairs as need, thus saving expenses. And thirdly being able to keep an eye on one’s investment is always preferable to trusting someone else to do so.
House flipping is a term that has come into the mainstream over the last ten years or so as the housing market has become blisteringly hot in key areas around North America. Using this technique, one simply buys a house makes some cosmetic changes and then puts it back on the market several moths later. In the right environment this can be a very lucrative proposal, but keep in mind that it requires strict adherence to a short timeline and some houses may be more problematic than others and thus eat into your time and therefore profits.
Another type of house flipping requires a longer schedule and a willingness to wade through many local regulations; it also involves a great deal of up-front investment. What we are talking about here is subdividing a single house or structure into multiple rentable or purchasable units. The advantage here is that a single structure becomes a high-quality set of apartments or condos. And either route taken can yield significant returns. Best of all, as more people are flocking to the cities, more city governments are welcoming this innovative approach to housing development.
While these are but three of many different strategies, they do tend to be common and, moreover, dependable. But, as with any type of investing, there is always a risk of loss. Your goal is to minimize, or even nullify that risk through due diligence. This means doing your research on a property.
If the property is a house or other structure look at the municipal records. Was this structure once a crack house or meth lab? This is the type of information to know before investing your money. Also, if the unit is to be rented, what kind of renters are liable to be attracted to this property? Many owners have incurred expensive repairs because tenants abused their living spaces with drugs, pets or just simple negligence.
But the great side of real estate investing, and especially in a rebounding economy, is in the returns. Properly configured, your investment will provide you with a stable income stream over a long period of time. This will enable you to either expand your portfolio or seek other avenues of investments, say a child’s college or trade school education.
A stable income stream controlled by you is an excellent bulwark against any uncertainty in the markets. We know that real estate values rise and fall depending on the social mood of the time but there is always one thing that property is doing, and that is accruing in value.
Making short term investments like house flipping means an immediate return and quite possibly a handsome one but the tradeoff is that you need to focus all your efforts on making that project meet schedule, and there is always the risk that property values may drop from the time of your purchase until the time you are ready to sell. The “Great Recession” of 2008 caught many house-flippers unawares and stuck holding onto inventory that was worth less than what they paid for it – even in spite of their renovations.
Buy and hold, on the other hand, makes the property work for you. It is a long-term strategy that can yield some hefty returns, if you have the time.
But, again, as with any investment activity, be sure to protect yourself. Your research and understanding of your market niche can not only keep you from losing money, it can help you enhance your earnings more than you thought.