We have outlined some real estate investment strategies that are “outside of the box” when contemplating how to participate in a commercial real estate investment. When reviewing any of the options below, we feel that it is important to seek the guidance of an experienced CPA or real estate attorney, as per our obligations to our state licensing entity.
1. Find, Purchase, Hold
This strategy is designed to create long-term, residual wealth. A certain emphasis is placed on identifying and locating the resources necessary to make a deal successful and to protect future interests. In this situation, it is important to analyze closing and any financing fees, as well as adopt strategies that may reduce or eliminate operating expenses and maximize cash flow.
2. Fix it, Flip it
Most investors that entered within the last decade have relied on property prices rising year-over-year. Today’s investors are more apt to turn properties quick for cash. Get in, Get out. The anatomy of a flip is determined by how clear the objective is and able the budget, as well as how clean the marketing plan when solicited to the public.
3. Pre-Foreclosures, Foreclosures
This method has not been an excellent source of opportunities, although it is in its infancy in today’s marketplace. Acquiring foreclosed properties through two methods, auction and bank REOs, may provide the buyer with aggressive prices and terms that tend to be more favorable. It is important to understand that a certain level of preparation is required prior to bidding at auction. You will need to become a strong participant, or procure a broker that is proficient in the auction process. How you should approach banks for REOs is another consideration.
4. Tax Lien Certificates
Secured by real estate and guaranteed by the government, tax-defaulted paper is another investment vehicle that is used by keen investors. Delinquent taxes of others can in return yield a handsome interest rate as well as the possibility to obtain the property itself, free and clear. Understanding the differences between tax lien certificates and tax deeds, how to research properties online and hedge against certain risk factors associated with tax foreclosures is paramount.
5. Lease Options
Leasing the property today for purchase tomorrow is a creative acquisition strategy for those with limited available funds. We recommend learning how options differ from that of a standard lease, as well as the ways to create options, the proper method of transferring title and the differences between certain options. There are many legal aspects of options and we recommend sitting with a real estate attorney to discuss.
6. Probate Purchases
A strategy for obtaining leads to purchase real property that is for sale, but has not yet been exposed to the market. Probate refers to the transfer of (in this case) real estate when people die, with and without a will. It is important to understand the differences between probate and non-probate, as well as where the property will be sold.
7. Subject-to Purchases
This is a method of buying property that is subject to the seller’s existing financing. You may present offers to motivated sellers to gain ownership of property without qualifying for new financing. Down payments and interest rates are the real motivators as it may be significantly less than from a traditional lender. In addition to analyzing the property, it is important to evaluate the existing financing, the sellers position in the property, and the market.
A wholesaler places a property, typically distressed, under contract and assigns or resells the property to another investor. The investors a wholesaler sells to either use cash, lines of credit, or hard money loans to obtain the property. This is a great low risk way of inviting investors to your party. If a property is priced low enough, someone will buy it.
There are many facets of running a successful rehabilitation project, including the analysis of repair options and cost factors. Understanding the benefits as well as the pitfalls of rehabs is essential. Also, locating economically feasible properties, based on an understanding of cost estimations is key.
10. Short Sales
This is the investment into purchasing pre-foreclosure properties by discounting existing mortgages. The critical keys to success in the short sale process are through the conversations that take place between sellers, loss mitigation specialists, and other professionals who determine property value. Analyzing the components of a successful offer and learn the secrets of handling second mortgages, judgments, liens, and other title issues are of importance.
11. Land Development
Conceptualizing the creation of a project is the best way to significant returns over a period of time, especially if a fee is underwritten. A step by step process for land identification, procurement, and entitlement are essential. The development focus is on basic principles and strategies of land location, market needs analysis, project approval, and the decision-making processes involved therein. Comprehension of the viability of a project for potential profitability and marketability while learning the key role that a certain level of knowledge plays in the land development process is important. Developing a feasibility study, to land identification, to plan submittal are all aspects in land development.
12. Seller Financed Notes
This is the ability to generate significant passive income yields when purchasing real estate secured seller-financed notes is attractive to investors. The idea is to locate and negotiate the purchase of a note, as well as structure and create notes and negotiations that may take place between note holders and investors. The due diligence involved in compiling and verifying the necessary information, calculating an offer based on desired yield, analyzing deal risk factors, and the process of closing and funding a note purchase transaction are important.
13. IRA and Retirement Plan Investing
The benefits of the IRA through real estate investment serves as a vehicle that provides the freedom to invest in what the investor truly wants, instead of what the insurance company or stockbroker is offering.
And, there are more! Contact us for a thorough review of each investment strategy, with your objective, to best determine an ideal fit. Then, let us perform the due diligence necessary to uncover the opportunity.