There are many real estate strategies that you can use for buying a home, selling a home or investing in real estate. Although designed for the long run, some of these strategies can help you make a profit from a sale in a short amount of time. As you look through these strategies, keep in mind that the best strategies come from a professional real estate agent, certified real estate training courses or good old-fashioned experience.
There are three specific categories for real estate strategies. The strategies are: bargain purchasing, increased-value, and double digit cap rate.
- Bargain purchasing is the purchase of real estate for 20% or more below current market value.
- The increased-value strategy is when you buy a property for its current market value but you choose only properties with some unrealized potential. Immediately after you purchase, you make certain changes that are necessary to increase the value of the property. Typically, you must increase the value by at least 20% within six months so that you can get the most out of it and the strategy will be worthwhile.
- Double digit cap rate is when you buy the building on the terms that it has a capitalization rate of 10% or more. This is the rate where the net operating income is divided by the purchase price. In other words, it is the cash-on-cash rate of return you would get if you owned the property on your own. When there are no bargain purchases, double digit cap rates are very hard to come by. They typically only happen for a short amount of time in depressed markets.
The most common real estate strategy for investment is when you buy properties where you believe the value will increase soon after purchase due to market-wide appreciation. Although the most common strategy, this real estate strategy relies heavily on luck. Most markets will increase over time, but they can fluctuate dramatically until you own the unit for more than 10 years. This strategy is only helpful if you have inside knowledge about the growing demographics or popularity of the region where you want to buy.
There are two different holding periods, long term and flipping. Long term means that you hold the property for years. Flipping is when you sell the property as soon as possible after you acquire it. Sometimes, you can sell it before you buy it, or do it at the same time. However the best real estate strategies would suggest that it is best to sell it soon after purchasing to avoid unnecessary stress and possible troubles.
Some strategies, like buying foreclosures, require huge amounts of cash upfront. Even though there are many no money down possibilities out there, cash makes your investment life much easier.
Different interactions that you will be doing will require different people skills. There are certain kinds of people in different types of real estate. Make sure that you know which you are so you can select a strategy based on your personal skills.
In real estate, there is an investing strategy for every personality and skill. The important thing is to not get into any one of these strategies without a complete knowledge of your investing goals, the market you are getting into and the possible outcomes of your strategy. A real estate agent or a certified training course in real estate can help you along the way to success.
By Jessica Maughan