Property Investment Strategies That Work
Property investment strategies are as varied as the people who enact them. You could use property investing strategies for the rest of your life and never use them all. There are, however, some time tested proven strategies that still work great today.
What is your personality type? This is probably the first thing you should consider before even beginning in any property investment strategy. Why is this a big deal? It will have a huge impact on where you should start your investing career. As I said, there are many strategies that you can focus on, maybe one day you will use many different styles but in the beginning you should focus on your area of strength.
Where to begin? Once you have determined your personality type focus on an investment strategy that suits it. For example if you love talking to people you will be more of a deal maker allowing you to negotiate great deals. Some say that you don’t make money when you sell property but when you buy it. If you consider yourself a managerial type then maybe being a landlord is for you. Maybe you don’t care so much about talking to people but you love to work with your hands. Focus on fixing up dilapidated properties and selling them for a profit.
Here are some specific strategies that one can focus on in the beginning before you are a master investor that can get you started.
Buy and hold- This is one of the more simple strategies depending of course on what type of property you intend to buy. Perhaps the first investment property strategy you will engage in. In fact buying your own home is essentially this strategy. In regards to an investment property though, you will be finding usually a lower price home in an area you can afford starting out, maybe have some minor repairs done and make the property livable. Next, find a good tenant and have them sign at least a year lease. After you find someone, try to take good care of them so they are happy living at you property. Most people that are happy where they are don’t leave for 5-7 years. If you can afford it, get a 15 year fixed rate loan to pay off the house as soon as possible. This is one way to begin.
Lease option- Another great way to begin building your property investment strategies repertoire is to buy a house, in a middle to low income neighborhood where the area is well taken care of by those who live there. Just because they may not have all the money in the world does not mean they are not great people that work hard. If they have pride in there neighborhood and the neighborhood is close to schools and shopping then you found a good place to invest.
After you have purchased the home, preferably one that was a little run down so that you can get a great deal on it, then you get it ready for the lease option. Warning, make sure the property is only cosmetically run down and that there aren’t any real issues like foundation, plumbing, or electrical, those issues can cost you a fortune. A little paint inside and out, some landscaping and maybe carpet is usually the kind of fixing up you want to limit yourself to.
After the property is fixed up begin to search for a person to live in your home that is willing to lease it with the option to purchase at a future date. The lease option can be a lucrative deal if you can get a good deal to begin with, the work is minor, and you charge a decent option fee.
So what exactly are the terms of a lease option? The beauty of this property investment strategy is that you can structure the deal almost anyway you like, although they need to be somewhat reasonable. The typical deal might look something like this. You find somebody interested, say you bought the house for 70,000 dollars; you spent 6,000 to get it ready to move in. At this point you have 76,000 dollars into the deal so you might make a three year lease option.
The lease option is just like it sounds, a typical lease but with the added option for the lessor to purchase the house at an agreed upon price three years from now. You can see what the market bears in that area by doing a little research for the past ten years. At that point you can see what the house might do in the next three years. Then you add a little premium for your time and trouble and that is your option price.
In addition to the purchase price agreed upon, you will also get a non-refundable option fee. The option fee is the fee you get to do the lease with the option to buy in the first place. Usually for a house with numbers like that of those above you could get anywhere from 3-5 thousand. The great thing about this is you don’t even care if they move because you got the option fee and you can do it all over again. Theoretically, you could make a fortune on option fees alone, not to mention the fact that people that think they might buy the house will take much better care of it. Much better that simple renting, and you don’t even have to buy the house, if you get a good lease rate, you will easily be able to cover the mortgage and then some if you have good credit.
Flipping properties- one of the most potentially lucrative property investment strategies around. There are two types of flipping though that you should be aware of. The kind that hurts the market, robs the seller, and messes over the buyer is what we would like to avoid. The purchase should be made at a somewhat fair price, I’ve seen less reputable investors search only for the most desperate people they can find that are in a very dire position and will do almost anything to get out. They have a decent amount of equity and are basically robed of it for the sake of getting them out of there problem quickly. These types of investors give all investors a bad name.
Get a good deal by finding a house in a pretty decent neighborhood that is severely discounted due to the appearance of the house. A trained eye can tell pretty quickly if it is truly damaged or if it is just ugly. If it is just ugly then that is what you want. Maybe the house just appears destroyed but carpet, paint, landscaping, and a few holes in sheet rock might be most of what is wrong. All of these items are relatively cheap to fix and once they are fixed will make the house look very nice. Often times you may just spend a few thousand to maybe 8 or 10 thousand depending on whether you do the work yourself or hire it out.
Often you can make anywhere from 15 to 30 thousand dollars or more profit on each house depending of course on several factors. After awhile you could even have your own fix up crew that knows exactly how you love to have your houses fixed up and will work efficiently. Property investment strategies like these are not for everyone but for those who are up for the challenge you can potentially make a fortune.
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