If you entered your e-mail address into even one website offering an investing course, e-book, webinar or the like, than you probably get bombarded with offers everyday selling the latest and greatest real estate investing technique. In all honesty I don't mind receiving these types of e-mails and am actually on several peoples list. Some are good, some bad and some are just ok. The point to all of this is that there are tons of ways to make money in real estate and for the most part all of the strategies are legitimate and worth learning about. Here at Homes For Investors however we only focus on three types of real estate investing, well four actually but we only teach three. The three strategies we encourage our clients to use are:
Buy and Hold
Buy Fix and Sell
Rent to Own
These techniques are timeless. They worked decades ago and will work decades from now. They are the foundation in which all other techniques are built from. Let's take a look at each technique briefly and identify the attributes of each.
Note In future sections of this series we will get into great detail about each one of these strategies, for now though, just the basics.
Buy and Hold This is certainly not the quickest way to wealth but it is definitely one of the safest and easiest strategies to implement. Buying and holding a property is simply when you acquire a property for the purposes of renting it out and using the monthly rental income collected to offset your expenses associated with owing the property. In a perfect world your monthly rental income will cover all of the expenses plus leave you with a positive cash flow. This strategy is not to be used until you have adequate cash reserves as getting a part time job to pay for your rental property is no fun. Ask me how I know!
Buy Fix and Sell Buying fixing and selling goes by many names. It's commonly called flipping and sometimes called retailing. When using this strategy you identify a property located in an area that has a high likelihood of appealing to an owner occupant. You acquire the property for as cheaply as possible and renovate it, bringing it up to acceptable market standards. Once complete you market the property or hire a real estate agent. The objective is to sell the property to a willing and able buyer as quickly as possible and for the highest possible sale price, therefore maximizing your profit.
Rent to Own The Rent to Own strategy is a hybrid of the Buy and Hold strategy and the Buy Fix and Sell strategy. When using this technique you are offering your property to a tenant / buyer [tenant today - buyer tomorrow] on a lease agreement while simultaneously giving them an option to purchase the property for a predetermined sale price and for a predetermined amount of time. This is not the time or place to get into great detail but please realize right here and now that only a percentage of these deals actually come to fruition. The deals that don't close either end up being converted to a Buy and Hold rental or vacated, spruced back up and set up on a Rent to Own agreement all over again.
These three strategies alone are enough to build a lifetime of real estate deals. In fact most old school investors only use these techniques. Most balk at some of the more creative techniques used today. If you are new to the business I would recommend you learn the ins and outs of these techniques as they are absolutely the basis for all other techniques out there. If you master these the rest will come easy.
Since 1999 I have been using these exact techniques in conjunction with my wholesaling business. Lately, last 3 years or so I have been concentrating more on Buy and Hold and Buy Fix and Sell but Rent to Own is a very viable strategy as well, just not one I've been using lately. The next 3 lessons are focused on the details of each one these strategies so stay tuned and happy investing! .
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