Several Ideas on Investing in Real Estate

Wendy Weir
Published on May 3, 2015

Several Ideas on Investing in Real Estate

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If you want to become a real estate investor, there are Several ways to do it. You can begin by Buying a small home and Flipping it. The money you make on this purchase then can be put towards another property, over and over. Flipping Houses & Rehabbing via Bigger Pockets

To get started off on the right foot, you’ll need to make some decisions. Follow these steps prior to entering the real estate market.

Assess your current finances

Typically, financial professionals advise buyers put down at least 20 percent of a home’s purchase price. But to avoid being responsible for two mortgages, many investors wait until they can pay for real estate outright. Obviously this requires a large savings, but to skip the lender and avoid interest rates you might opt for a foreclosure listed below the local market median.

If you do need a mortgage, you might consider living in your investment property to take advantage of the tax breaks if you Homestead the property. You don’t have to live there forever, either. Lenders typically require just one year of residency to lock in the lower rate for the remainder of the mortgage. Owner-occupied interest rates are much more favorable than secondary home or rental property loans.

Determine the potential cash flow

House flipping shows can make quick profits look easy. Typically, most homeowners don’t profit when they sell shortly after closing. Of course, a major renovation on a flipped home increases the potential for short-term profit, but such extensive upgrades are going to cost a lot of money. Unless you’re capable or experienced in large-scale home improvements, don’t assume you can flip a house by yourself to benefit immediately. I have been an Investor – with two separate Companies. One company takes the homes down to the foundation, then builds NEW … this is a great way to Invest – while someone else coordinates all the Contractors, Materials, Licenses…

The Biggest thing you need to be concerned with here is KNOWING the other persons success rate, how many homes they are Renovating at one time and how many Contractors work for them. Additionally – I NEVER invest in any property that sides, fronts or backs to a Main Road – sometimes not even with 3 houses of a Main Road – Reason being – once you have an offer on that property, the Appraiser will be Required … to use the most Recent Comparable Sold property , closest to that home, and it might not be the one you Originally thought it might be, if other ones have sold Since you were counting on that one as one of YOUR Comps! Don’t rely on Price Per Square Foot either! via Bill Gassett

 

Decide on your investment type

Here again, there are many different choices for Investment properties. You can Invest in a Limited Partnership Agreement with a Company – one example of this is Buying a Resort Unit at Marriott’s Camelback Inn in Paradise Valley Arizona, just outside of Scottsdale. Here you can Buy a Unit, and for each Unit you own, you have many different options. You can Use the 28 days per unit, as vacation time – paying ONLY the maid fee of $12 per day while staying there. Or, you can choose any Marriott, Ritz Carlton or Renaissance Hotels and Resorts around the WORLD!   Again, paying ONLY, the maid fee + the Local Real Estate and State taxes on the room. However, if you only have a weeks vacation per year, As an Owner, you will share in the annual net income of Camelback Inn’s Condominiums and your Investment (may) also entitle you to tax benefits.

Scottsdale Resorts | JW Marriott Scottsdale Camelback Inn

Many investors default to considering individual direct ownership as their only way to profit from real estate. However, partnerships (both close and limited) and publicly-traded investment trusts are designed to help investors who might not have the time, or the skills, to run real estate investments on their own. Partnerships can benefit individuals with similar investment interests who aren’t quite ready to dive in solo. Real estate investment trusts (REITs), on the other hand, enable investors to fund multiple projects simultaneously without the hassle of day-to-day management.

“REITs behave in a certain respect like stocks (potential for capital appreciation/loss) and in certain respects like bonds (high levels of current income),” says Rich Ellinger. “These somewhat unique properties, combined with the ability to raise rents on the underlying properties in inflationary times, mean that REITs behave a little differently than other types of investments. Although subject to economic fluctuation, REITs have performed well in the past few decades. Over the past 20 years, REITs have appreciated approximately 13 percent per year — the top among all equity classes,” Ellinger says. 10 REITs with the Best Track Record For High Dividend Yields. via Market Watch

Unsurprisingly, your financial capabilities, estimated profit margins and choice of investment are all interconnected. Whether you’re starting out with $10,000 or a million, staying informed in the real estate industry — even as a passive investor — is a key to success.

Wendy Weir Real Estate Agent, Relocation Specialist, Birmingham MI 48009

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Several Ideas on Investing in Real Estate
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