Investing can be seen as a daunting task for most people. In fact, even though there is a strong desire to capitalize on opportunities, there is also a strong sense of fear lingering as well especially at the beginning. It is important for one to assess and identify the type of investment that is a best fit with one’s goals, visions, finance and risk level.
Below are some quick fact on investing in Real estate.
Buying and selling: in this process, you buy and sell a property for profit, there is a need to research the property and the cost of repairs. Even though it seems easy but there is a lot more than just buying and selling as one needs to know more about the market and what is and will be happening in the neighborhood selected as well as price trends.
Foreclosures: This could be a good buy assuming that the price is appealing and the previous occupants did not destroy the property and the buyer is not responsible for other liens.
REO: A house that failed to sell at a foreclosure auction. The house then goes back into the bank inventory. Those type of properties could be good to buy assuming that the price is appealing and the buyer understands the work that might be needed prior to selling the house. Such houses might have some plumbing issues and other important items missing from the property.
Trustee sales: prior to going back to the bank, a property is sold at a trustee auction. The bank has the opening the opening bid, if no one bids above the initial bid, the property goes to the bank. Any bid above the the starting will win assuming that the bid is the highest. Once bought, the buyer might be stuck paying other fees and escrows associated with the property. In some cases, the buyer will need to evict the current occupant ( just make sure not to offer any type of lease).
Short sales: the current owner tries to avoid foreclosure, therefore wants the bank to accept a lower amount for the sale than what is owed. A short sale might take 3-12 months. The bank has to approve the sale, not the seller. This could be a good option for those who are willing to wait as in some cases, the house might need little to no work and the price might be lower than the market value.
Auction: this is exciting and can easily get out of hand. It is important to know one’s limits and to stay within the limits. There is in most cases an auction fee associated with the sale. In case the auction fee is 10% of the sales price, a house bought for 200k will end up costing 220k. Such properties sometimes need various degrees of repairs before being re-sold.
Tax lien: Such properties can be bought at an auction. The liens expire, so it is important to try to collect payments early. In the event of foreclosure, the buyer of the tax lien might not be able to recover his or her investment in case there are other liens on the property. Tax liens investments are best for sophisticated investors and not novice investors.
Assignment: One makes an offer to buy a property then re-assigns the contract to another person for a profit. After making an offer for 100k, one might elects to sell ( re-assign) the contract to someone else for $110k. A profit of 10k has been realized without ever owning the property and being involved in the full transaction. There is a need to have a willing buyer of the contract otherwise, the seller might have to go through with the full transaction or lose his/her EMD in case of cancellation.