The RIGHT way and the WRONG way to invest in real estate? If only. It would be great if we could all learn the "right" way or even the "best" way to invest.
We've been investing full time since 2005 and have done hundreds of deals every way you can think of from wholesaling to retail flipping, assigning, selling with lease option and holding rentals. I can assure you there is no "right" "wrong" or even "best" way to invest in real estate.
Why? Because, it depends. It depends
- your goals
- your location
- the property
- the buyer
- and probably most of all, the economy
2005 was a great time to renovate and sell retail (though we didn't because we didn't have the necessary cash to renovate, nor did we have the success necessary to attract lenders). Why was it a great time to flip? Because it was easy to sell. For those of you who weren't in the business then, know that all you needed in 2005 to be approved for a mortgage was a pulse. And what were houses appraising for? Anything you needed them to. Simply tell your appraiser what your buyer needed the house to appraise for and, like magic, that's what the appraisal would turn out to be, sometimes to the dollar.
Fast forward to today and we wonder where those mortgage lenders (and the appraisers) have gone. If you've tried to sell a property in the past year, you know that it can be tough for buyers to get a loan and it's also an effort to get the property to appraise for as much as needed. Lenders have tightened their borrowing requirements and appraisers are under a great deal more scrutiny since the 2008 mortgage meltdown. Not that either of those is a bad thing, just the reality we work with today.
And that reality is in constant flux. Selling, and therefore flipping, is actually much easier again than it was recently for a number of reasons:
- lenders seem to be lending again
- meaning buyers are back in the market looking for deals while prices and interest rates are low
- causing the real estate market to stabilize somewhat leading to increased house values
The ebb and flow of real estate.
As you can see, the "best" way to invest in real estate is not necessarily the same year after year. When lending and values are strong, SELL! Flip, wholesale, retail - unload the dogs from your portfolio.
For the reverse economy, when lending froze and the economy depressed, we were thankful to be holding rental properties as we had more tenant applications than vacancies. Previous homeowners were losing their homes (for a variety of reasons) and needed to downsize or simply to rent because they no longer qualified for loans. Back when lenders were giving loans without even requiring the borrower to qualify (no doc loans), it was hard to find a tenant.
The moral of this story: there is no "right" way or "wrong" way to invest in real estate. There are certainly "better" ways depending on the circumstances discussed above, but don't wait until you've figured out the "right" way to invest or you'll miss a ton of opportunity!
About the Author:
My name is Karen Rittenhouse and I've been investing in real estate full time since 2004. In the past few years, I have bought and sold roughly 100 single family homes. Please check out my blog - http://www.KarensPerspective.com
As a company, we buy, sell, rent, lease, owner finance and manage properties for ourselves and for others. Check out our site at http://www.AllPropertySolutions.com
I also coach and train anyone interested learning about investing in real estate.
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