Real estate investing offers the potential for significant returns. It also offers tax benefits and the opportunity to realize long-term appreciation on the value of a property. Over time, real estate generates consistent value and has the potential to deliver huge profits for investors.
There has never been a better time to get in the game. As a result of the mortgage meltdown and the recession it triggered, property values are the lowest in years, interest rates are at an all-time low, and foreclosures are at an all time high. While this is an unfortunate scenario for some homeowners, banks are motivated to sell their backlog of foreclosed properties, so the chances of getting a good deal are high. And Fannie Mae recently loosened its rules on the number of homes investors can finance from four to 10.
Common Types of Real Estate Investments:
Flipping a house means that you buy it low and quickly sell it again. Generally, houses that are flipped need work and are listed at a discounted price. Real estate investors repair the home to restore its value, and then they sell it for a profit. There are different types of “flipping” investors: the scout, who finds potential deals and sells the info to other investors; the dealer, who finds the properties, puts up earnest money, signs a binding contract to buy them at a set price and then might do a simple clean-up and re-sell the property to owner occupants or to other investors who do the rehab work; and the retailer, someone who buys and fixes up the property, putting more money, and thus is exposed to more risk, than the dealer.
Income properties earn income through renting, leasing or price appreciation. Residential income property is commonly purchased by investors and speculators who use the rent to cover their monthly expenses until the property can be sold for a large capital gain.
If a homeowner is upside-down on their mortgage, they can negotiate a deal with the lender in the hope of avoiding foreclosure. The lender agrees to accept less than the amount owed on the mortgage, which allows it to avoid repossessing the home in foreclosure, which can be expensive and time-consuming. The seller benefits by avoiding the negative credit ramifications of foreclosure. Short sales are priced below market values, creating the opportunity for buyers to get a great deal.
Real Estate Groups
A real estate investment group is an organization that builds or buys a group of properties and then sells them to investors as rental properties. In exchange for finding tenants, handling maintenance and other responsibilities, the organization receives a portion of the investors’ monthly rent proceeds.
Real Estate Investing Clubs
Real estate investing clubs are membership associations that help new investors learn the ropes by networking with and learning from experienced investors, realtors, lenders and other professionals. There are 342 real estate investing clubs in the U.S. and Canada, including 57 in California, 20 in Texas and 11 in Colorado.