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Baltimore, Maryland 21202

Baltimore, Maryland 21202

test, Alaska

Financial Forecast:

Price: $ 35.00

Estimated Repairs: $ 2,000.00

Resale Price: $ 40,000.00

Net Profit: $ 3,000.00

Home» Investment Strategies for 2009

 

The real estate market is always changing. The strategies of 2004 and 2005 no longer work in this market. The days of buying a brand new house then flipping it quickly to another buyer for $30,000 to $50,000 in profit are long gone. Mortgage parameters have changed so knowing what works is critical.  Below is our assessment of the latest techniques that can be used to make money. There are several of course, but this is your basic Real Estate 101 information.
 
 
BUY and HOLD - Rentals
 
Benefits                                                 Risks                                      Property Leads                    Selling/Holding  Costs
 
Taxes – Depreciation                         Property Destruction            MLS                                        Mortgage Payment
Income                                                  Property Devaluation           REOs                                      Insurance
Long Term Wealth Creation             Wealth in Decades              Other Landlords                   Taxes
 
Recommendations:
 
Because of the recent market crash, many rehabbers have been stuck renting their properties just to get some cash flow to pay their fixed costs. If you are a high income professional looking for a tax break and can afford a management company or have the time to chase rent checks, this is definitely a great way to build long term wealth. It's not for everybody and can be frustrating. Section 8 is a nice way to gaurantee payment but also comes with annual inspection challenges. For the next 15 months, definitely look into the GO Zone as well which offers a 50% Bonus Tax Depreciation in the 1st year. A no brainer for doctors and high income professionals. Go Zone Details
 
 
 
Rehab Flips
 
Benefits                                                 Risks                                     Property Leads                    Selling/Holding  Costs
 
Quick Profit                                           Over Paying                          Internet Websites                 Repair Costs
Short Holding Period in Theory        Over Rehabbing                  REOs                                      Interest
                                                                Property Devaluation          Short Sales                          
                                                                Unable to Sell
 
Recommendations:
 
Back in the hayday of 2004-2006, loose mortgage standards and the sub prime products made it very easy to find buyers for rehab properties. That is no longer the case. It is tougher to not only get a qualified buyer but also to secure the funding needed to do the rehab. Hard Money is still available but can be almost cost prohibitive with rates up to 15% plus 3 points. And because money is so tight, the buyers that can actually get a mortgage have tons of properties to choose from and typically low ball offers making it very hard  for rehabbers to make a reasonable profit. Many that bought in 2007 and 2008 are having to find ways to make ends meet thru rentals and owner financing. If you are just starting out in the investment business we suggest buying property that needs very little rehab. And save yourself a gigantic headache down the road by hiring an inspector. It's never the things that you can see that are the problem. It is the big ticket problems you can not see that will cost you big bucks. Spending a few hundred dollars before you buy it could save you tens of thousands after you already own it.
 
 
 
Transactional Flips
 
Benefits                                                 Risks                                      Property Leads                    Selling/Holding  Costs
 
Virtually NO Risk                                 B to C Buyer Walks              Short Sales                           NONE – 1 Day Holding Period
Very Quick Profit                                  Long Negotiation Periods  Internet Websites                Marketing Costs for B to C Buyer
Maximum Use of Capital                   Bank Short Sale                   Signs                                      NO Repair Budget Required                                            
                                                                FHA Mortgages
  
Recommendations:
 
This is the new real estate fad and because of the short sale market and process, a great way to buy yourself some time to line up a buyer before you are required to close on it. It works well now because there are so many properties in great condition in the foreclosure process where very little rehab work is required reducing risk associated with holding costs. Keep in mind, IT IS ILLEGAL IN MOST STATES NOW TO DO DOUBLE CLOSINGS!  Meaning you can not use the buyer's funds (B to C transaction) to close your purchase (A to B transaction). That does not mean you can no longer to Transactional Funding (Same Day for Purcahse and Resale) as long as you are closing the first transaction with seperate funds. The premise is the same however. You make an offer, wait to get short sale approval from the bank, find a buyer for the house, and close the purchase and resale on the same day. In terms of risk to the investor, there is virtually none. Your money is tied up for less than one day. Your profit is the difference between the short sale price you negotiated and the resale price you sold it for. Make sure you have a great title company in place and avoid FHA loans because of the 90 day seasoning issue. If you need a funding partner or a marketing platform to find the houses as well as the buyers visit our Mentor Section.
 
 
 
Lease Purchase Contracts
 
Benefits                                                 Risks                                      Property Leads                    Selling/Holding  Costs
 
Avoid Renting Issues                        Property Destruction           Short Sales                            Mortgage Payment
Income                                                 Property Devaluation           Internet Websites                 Taxes and Insurance
Some Price Protection                      Buyer Non-Performance     REOs                                      Marketing Costs to find Buyer          
Down Payment from Buyer              
 
Recommendations:
 
This is our recomendation for those of who cant sell your properties for what you owe on them due to the current market. MAKE SURE YOU USE A COMPANY THAT SPECIALIZES IN THIS...SEE SELLMYHOUSE.COM!  This is a much better option than renting the house just to get a payment made. You collect a downpayment along with the monthly mortgage check. Set the contract up so that if they do not perform they lose their downpayment, you can evict them versus foreclose on it, and most importantly, the final price is determined by appraisal at the time they refinance. That will buy you some time to hope the market rebounds. There are some risks so make sure you hire somebody to protect you and manage the buyer's credit/mortgage process. Many of our investors are converting to this method of selling because it offers both a short term income option with the potential of cashing in on the profit in a 4 to18 month period. The buyers are committed because they feel like they are buying versus renting. A word of warning, if you are in the business of selling 'lemons', be very careful doing this. That is the fastest way to get your face on the local 6 o'clock news. When that happens, you will never recover so fix all the major issues for them when you sell it.