Smart Strategies For Real Estate Investment

Author: Naomi Warne
Date: 9/27/2005

If you're deterred by the roller coaster rides of the stock market, then real estate is the best place to invest your hard earned money.

But real estate business is not an easy one. It calls upon concrete strategies to realize your goals and turn your business into a lucrative venture. If you're an aspiring real estate entrepreneur, then have a look at the five strategies given below that will help you in having a successful real estate investment.

Buy and Hold strategy
Under this strategy, you buy a property and lend it on rent. Hence, this strategy is usually known as rental properties. Buy and hold strategy of real estate investment opens three paths of income for you: amortization-you lower the amount of debt while paying your mortgage, appreciation-you increase the value of your property over the years, and tax incentive-as a landlord you'll get a chance to cover up your investment costs within a few years. Even if the rent doesn't break even your entire mortgage payment, it's not disheartening, as you still have a positive cash inflow.

But before entering into a contract with your tenant, you should make yourself aware of your rights and duties to avoid trouble later.

Flipping strategy
Flipping involves buying and selling real estate property without taking its ownership. You sign a contract with the buyer of your property and earn a commission for your services. There are no credit checks or down payments involved in flipping. And the bright side is that you don't need to go for a mortgage, as you're not the actual owner of the property that you are selling.

However, there are two conditions for successful flipping of a real estate property: the property should be able to attract buyers within no time and you shouldn't keep hold of the property for a long time, i.e., not more than 15-20 days. Under this strategy, you simply buy the real estate property, flip it to a buyer, and collect your money as commission.

The strategy of Rehabs
Here, you buy a ramshackle property at a cheap rate with the expectation that your rehabilitation cost estimates will be highly rewarding at the end. This strategy looks good only on paper. The truth is that such kind of real estate investment involves a high amount of risk and usually end up in loss. This happens because you either fail to find a worn-out property that is cheap enough to give you a profit, or worse-the rehabilitation costs end up being higher than the cost of purchase.

Commercial Real Estate Investment strategy
Commercial real estate doesn't always mean magnificent shopping malls or office complexes. Any building larger than a 4-unit apartment is regarded as a commercial one. The big advantage of commercial real estate investment is that your property value is calculated in terms of the income it generates through rent and not in terms of bidding on residential real estate.

New Construction strategy
This strategy involves selling your new home during its construction phase. Most of the investors find this strategy to be the most affordable and the easiest one. The important thing here is to keep yourself updated with the market trends. However, there's a limit imposed by the construction companies on the number of homes you can buy.

A smart way to make an optimal use of this strategy is to have one or two homes under construction continuously. But this strategy brings profit only in a sellers' market. If you find the local real estate market to be highly fluctuating or to be on the buyers' side, then it's better to avoid this strategy.

The above five strategies will help you to reap rich harvests in real estate investment provided that you select the most suitable one. The choice is yours.

About the Author:
Naomi Warne of Around the Corner Real Estate Dealers, Sydney, has helped her clients with profitable property investments and numerous tax benefits. Having started as a Real Estate Agent, Naomi has established herself as an analyst and Property Consultant. She now works for Sydney based realestate firm Mortgage Mall.

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