Real Estate Investing
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You buy a house and rent it out, sit back and watch the rent payments come in, right? Well not quite. If you were to talk to the majority of landlords youd find that they had horror stories to share. The successful landlord has learned real estate investment in a trial by fire, with no shortage of mistakes made in the heat of battle. Real estate investment can be a profitable investment, but without a full understanding, can quickly turn into a stressful nightmare.
Real estate is more of a stable investment than many others; vary rarely does property value ever go down. There are pros and cons to investing in real estate; here we will talk about a couple of them. The two most popular ways to invest in real estate are to buy a house, fix it up and sell for a higher price (house flipping) and to buy a place and rent it out (becoming a landlord.)
House flipping can turn a quick profit in a short amount of time. The basic idea is to look for a house that needs work and can thus be bought for a lower price. The buyer will then buy the house and do the majority of repairs themselves to save on costs, and then sell the house for market price. Many homes are available at a discounted price and with a little effort, they can be found extremely discounted. These deep discounted homes are often referred to as HUD homes. They are homes that have been foreclosed on, usually for default of payment, and will be auctioned off. Usually the minimum price is what is owed to the bank. If the mortgage lender is owed a hundred thousand dollars on a fifty thousand dollar house, then if the auction isnt very aggressive, the winning bidder could potentially walk away with fifty thousand dollars in equity. The investor will put money into fixing the house, and when done the cost of repairs could triple or quadruple the final closing price of the house.
So why doesnt everyone flip houses? Well there are also so negative possibilities. The biggest one is cost of repairs. Often times people dont have the cash to pay for repairs. Sometimes repairs will be estimated at one price and can turn out to be as much as double when all is said and done. Also if the investor isnt “handy” the cost of paying someone to repair the house may not be worth the investment.
Along with just repair costs, there are also issues with financing and market value. When the interest rates on loans are low, the market is usually hot, people are buying (sellers market). When the sellers market was in full swing, people were flipping houses left and right. One real estate agent from Sand Lapper Real Estate Group was able to flip a house in two days for a profit of eighty thousand dollars. This home didnt even require repairs. The flip side of this is the buyers market (when interest rates are high and people arent buying as much.) When the market cooled, people who had sunk money into the repairs of homes were all of a sudden unable to sell the house at the price predicted. Besides turning less of a profit, investors were often stuck paying multiple mortgages while waiting for their house to sell.
Another type of real estate investment is