Real Estate Investment Strategies
How to find the right one for you
If you have been bitten by the real estate investing bug and are thinking of getting your feet wet, you will need an investment strategy. Will your strategy involve buying foreclosed homes, purchasing commercial properties or just land? The answer is not always as easy as weighing one option over the other, since you have to consider a variety of factors such as your personal situation, potential tax consequences, available cash and financing options, current real estate market trends, etc.
There are several real estate investing strategies that may work for you and what you want to achieve. Three of the most frequently used real estate investment strategies include:
- Bargain purchase
- Increase value
- Double-digit cap rate
Bargain purchasing simply refers to buying real estate that is at least 20 percent below the current market value. Buying foreclosed homes is a common form of bargain purchasing. With the increase-value strategy, the investor generally focuses on purchasing real estate at the current market value, but selectively chooses properties that have unrealized potential. For example, you find a home for sale on the real estate market, or possibly a foreclosed home that you determine fits your buying criteria. You purchase the property, perform the necessary remodels or renovations that will increase the property’s value, and eventually sell when the real estate market is strong.
continued...› | 10/8/2008