A Real Estate Investing Strategy for You

Which Real Estate Investing Strategy is Best?

The best Real Estate Investing Strategy is the one that fits with your conditions and circumstances. It makes no sense trying to do an intense and involved strategy if you are not at that stage of the real estate game.

Now if you know for sure what you want and have adequate support and resources by all means go for it. But I think it's best to make yourself knowledgeable of many strategies first. Then you can pick and choose which one is right for you.

We have already discussed Zero down, land contracts, rent to own, wholesaling, refi around the rosy, REO's / foreclosures, pre construction, lease options, and commercial investing.

In this section of the Real Estate Investing Strategy I will go more in depth into a couple of these already mentioned strategies. (Also see Creative real estate investing.)

Wholesaling

A) Wholesaling is a real estate investing strategy in which you start the process of buying a house and then transfer everything over to someone else. You do the work, find the property, and negotiate the price and terms.

Essentially, you make and create the deal. Make sure everything is contracted properly.

The process is like any other purchase except for one important aspect. However, where it says �Purchaser is _________________� and you have filled in your name on the blank, you now need to write �& assigns� after your last name. This gives you the write to �assign� the purchase agreement to someone else.

Why would you do this? Because you have negotiated such a great deal on price that you can turn around and sell that property to someone else and make a quick profit of a few thousand dollars. Not bad for not actually having �owned� the property. This is an excellent Real Estate Investing Strategy. You are actually just selling someone a piece of paper for several thousand dollars. Don't get me wrong it is definitely an important piece of paper because at the top it says "Purchase Contract". How many pieces of paper do you know of that cost a few thousand dollars??

Refi-Around-The-Rosy

B) Refi around the rosy is where you use OPM, other people's money to buy property after property after property. I love this Real Estate Investing Strategy. I think it is the one I have used the most.

In this strategy, you buy or already have your first piece of real estate. You wait about 2-3 years and after your property has appreciated in value you go to the bank and say the following:

"Mr. or Mrs. Banker, I bought this property a few years ago and paid "this" much for it. (Let's say that "this" equals $48,000). Well now, Mr./Mrs. Banker, it's worth "THIS" much. (Now, let's say that the "THIS" equals $72,000). So, Mr./Mrs. Banker will you give me a new loan?

If you have kept up with your payments and have good credit, they will probably give you a 90% LTV loan. This means they will give you a loan-to-value ratio of 90% the current value of the home. An appraisal is done and whatever the amount the appraiser says the home is worth, Mr./Mrs. Banker multiplies that number by .90 and that's how much you new loan will be.

The old loan is paid off and you get a sweet check for the remainder. So let's calculate that now.

72,000 times .90 = $64,800 $64,800 - $48,000 = $16,800

You've just earned tax free income totaling $16,800!!!

Next you find another property to purchase using your loan proceeds as the down payment. Your first property has now purchased your second property.

You wait another couple of years and repeat this process with BOTH properties! Now you can buy two new properties!

This Real Estate Investing Strategy really works! This is how I accumulated my first five rental properties. You've just read the first part of my personal story. The rest will be available soon.

REO Properties / Foreclosures

REO Properties, also known as foreclosures, have become my latest Real Estate Investing Strategy of choice. I like this strategy because you can always find a property at a price you are comfortable with.

If you have $45,000 ready to invest you can find a property. Or, if you only have $4,500 ready to invest you can find a property.

Now, understanding that these are REO's, and that someone lost this property and may have been forced to leave, it is understandable that REO properties might not be in good shape. Know this from the gate. Once you have a solid grasp of this, I think the world is at your fingertips (provided you know how to fix up properties or have a terrific rehab team).

You can accumulate as many properties as your funds will allow. You can also accumulate as many properties as your supply of OPM will allow.

The reason why REO properties or foreclosures are my latest and favorite Real Estate Investing Strategy is because there are so many of them. Nowadays, banks own tons of property. And I can just come along and scoop up as many as my bank account, OPM and real estate investing plan will allow.

(More strategies)

Create a Real Estate Investment Plan!

This is actually a piece of real estate investing advice but it goes along very well here in this section of Real Estate Investing Strategy. So here's some advice:

Please create an investment plan. Know what you want each property to do for you. Consider your houses or future houses as employees in your real estate investing business. Each one has a responsibility and length of employment. Some employees are temps and others will remain until retired.

Some of your properties will be the ones who come to work everyday and are bread and butter type employees. They do a consistent although maybe slow and deliberate amount of work each day. You don't push them because you know they will always be there.

Other properties will be a little more radical. They may not be there everyday, but when they are there, you know you are going to get some serious productivity.

Know Your Exit Strategy

Create a plan for each property and I'd advise you to structure that plan around the numbers. This will further advance your Real Estate Investing Strategy . When you first calculated the numbers on the property you had a good idea of how much money this property could make you. You should calculate a monthly return, short-term, as well as an extended return of about five years. This long-term calculation will give you a very good idea of what type of employee this property will be.

You might even know already that you won't keep a particular property for five years. You know what type of employee it will be. Make sure you get the returns from it that you expect in the time frame you expect.

This analogy of making your properties your employees is just a new version of the REI advice: Know your exit strategy. The last Real Estate Investing Strategy is actually how I was able to get my very first home. I did a lease option. This is similar to the concept of rent to own homes and a land contract.

The Lease Option

Basically, the strategy works like this. You look through the newspaper real estate section and find any "Lease Option" ads. Call them and ask how the program works. Just listen and take notes. It should follow along these lines but they may throw in something a little different.

Asking Price: $225,000 Monthly Payment: $2,276/month [broken down as follows: $1651 + $625 = $2,276] $1651/month => I used www.mortgage-calc.com for a loan payment at 8% of $225,000 for 30 years $625/mo => monthly going towards the purchase price.] Down Payment: $7,500 Option period: 2 years

So, you agree on the asking price of $225,000. Your down payment is $7,500. Your monthly "rent" is $2,276/month for 24 months. Out of the "rent", $1,651 goes toward the actual payment of the loan and $625 goes toward the purchase price. So after one year, you have paid $625 times 12 = $7,500 toward the purchase price. After two years, you now have another $7,500 that was attributed to the purchase price.

The Lease Option creates the 10% Down Payment

So, in total, you have put $22,500 as a down payment toward the purchase of the home. $7,500 came from the initial down payment. Another $7,500 came from the first year's rental credit. And the final $7,500 came from the second year's rental credit. This total equals exactly 10% of the purchase price.

Now you can go to a bank, demonstrate that you have made 2 years of timely payments on your home (ensuring that you worked on keeping your credit score "good" during this time) and ask Mr./Mrs. Banker for a loan for $202,500 ($225,000 - $22,500).

Real Estate Investing Strategy

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