By Todd Murphy
Here are some successful strategies:
- Rental Property: An investor purchases the property and then rents the property to a tenant. This allows the owner to collect income on the property while the tenant is helping to pay down the mortgage.
- Fix and Flip- The investor purchases a home that requires work. This property is usually purchased at a discount due to its condition. The investor then rehabs the property and sells it to a home buyer for a higher cost than he purchased it for.Buy and Hold- If an investor buys and holds a property, it is usually in an up and coming neighborhood! The investor will simply sit on the property and allow the home to appreciate over time.
- Wholesale- Sometimes investors decide not to deal with the headache of fixing the property and selling it. Instead, they will sell the purchase contract to another investor and collect a finder’s fee. This model teaches investors to use all 4 models and all real estate investors should pay attention to all 4 models because of the state of the market. Home investing has been extremely fruitful over the last near decade and our experts predicted that we may be somewhere near the 8th inning of this investment cycle. This is especially important because you don’t want to find yourself with 10 fix and flip projects, right when the “game ends.” Real estate investors must be nimble and smart to avoid being in over their heads when that day does come. So, if you think the game is ending soon, what should you do?
- Stock Pile cash- You want to have assets, not liabilities if the housing market does crash. If you are in the middle of fix and flips, it may be very difficult to find funding in a down market. For that reason, you want to have capital! Cash will be scarce when the market corrects, which will allow those that have cash to invest and grow their portfolio while investors that are over their head, will look to quickly cut their losses. The value of cash goes way up when others don’t have cash.
Home investing in Birmingham, Alabama has been on the rise over the last 10 years and so many investors have had great success with all 4 investor routes. If you believe the market will continue to rise, you should still consider investing in fix and flip properties. However, if you agree with our experts that the market may be in the 8th inning of the cycle, you might want to consider saving your money and conserve cash.
Todd Murphy HomeVestor owner in Birmingham Alabama is a contributor to Metrolina Real Estate Investors Association, LLC. MetrolinaREIA.com