Many industries have suffered due to the recent economic recession and are currently slowly recovering. One of these industries is real estate, which is not as profitable as it once was, but remains an attractive industry for investors. Real estate, like many other industries, has recently started to show improvement, and it looks like it will keep improving over the next years.
For someone with less experience and knowledge, real estate may seem like a pretty difficult industry to invest in, especially during these times. Fortunately, by learning a few techniques, any investor who possesses the right determination can make it in this business. In this article you will find the three main techniques that you need to master in real estate investing.
Technique Number 1: Find Rent-to-Own Homes for Home Buyers
A good alternative for people who are unable to get approved for a mortgage loan is the lease purchase. This gives the tenant the option of buying the home that he is renting, but at a later date.
A fairly large number of potential home buyers are unable to obtain a mortgage loan, due to loan requirements becoming stricter. This has created a large number of people and families who are renting because they have no other choice. Lease purchase gives them the option of purchasing the rental before the lease term is up, and even the possibility of allowing part of each rent payment to go towards the purchase price. This is a great opportunity for those who are unable to get mortgage financing, and for the real estate investor.
Because of the housing market being in recovery, you have a significant number of homes that won’t sell because sellers won’t budge on the price. Additionally, there are a significant number of people looking to buy, but can’t qualify for loans. In order to make a profit, you must find a seller willing to agree to a lease purchase option, and then find him a tenant buyer. Bringing the two together will resolve both their problems and get you a nice commission. Because both the seller and the buyer are motivated to move quickly, the transaction shouldn’t take more than a few weeks to finish.
Technique Number 2: Investing in Foreclosures
You could make huge profits from investing in foreclosures, but if you don’t have the proper knowledge, a single bad investment can wipe out all of your capital, along with ambition to invest in real estate.
There are three ways in which you can buy homes in foreclosure: pre-foreclosure, at the auction, or buying from the lender after the foreclosure. Buying a foreclosed property from the lender after the auction is referred to as buying REOs (real estate owned), and it’s the less risky option of the three. The next riskiest time to purchase a property is pre-foreclosure, because the home can have many issues that the seller didn’t disclose. The riskiest purchase is buying a foreclosed property at the auction. You won’t receive any warranty or guarantees that the home is free of any outstanding liens or loans.
The best way to buy a foreclosed property is to find a good REO agent that has the necessary experience to make sure that the transaction goes smoothly and you get a good deal. Sometimes, real estate agents who are specialized in REOs have a few foreclosure listings that need to be sold fast, so they will be searching for an investor who can make the purchase quickly. If you have good relationships with a real estate agent, the first person he calls could be you, helping you secure a good deal in a short time.
Technique Number 3 – Buying Short Sale Properties
Many home owners who have found themselves underwater on mortgage loans might require a short sale. This is a great opportunity for the real estate investor to make some serious profit.
You can negotiate a good price with the homeowner or with the short sale lender, buy the home, and then flip it for a profit. Like in the case of foreclosure investing, finding a good real estate agent can make a huge difference. The agent can locate properties for you, help you with your investment plan, and help you negotiate a better price.
These three real estate investing techniques can make you very successful if you use them wisely. You must remember that not all properties that seem like a good deal are worth investing in. Familiarize yourself with these techniques, with the investing process, and don’t be afraid to consult a real estate agent. Even if you have done your homework, agents have the necessary relationships to help you find great deals faster than other investors, and get you one step closer to becoming a great real estate investor.