Investing in real estate is a great way to make some extra money and diversify your portfolio as well. It is a good idea before you plunge into your first investment property to at least have some real estate investment strategies in mind. Savvy real estate investors look for properties that are below market value. A good way to find these is to look at buildings that are foreclosures. Some times you can rent or resell a property right after it has been forclosed on if it is ready. In order to sell some properties you may need to do some updates or renovations before they can be sold. Working with a trusted real estate agent who specializes in foreclosures, knowing what types of real estate you are interested in investing in ahead of time and making the best deal you can is the best way to come out ahead.
You need to learn the many different investment strategies before you begin to invest in real estate. The most common strategy that real estate investors use is the one that can lead to the most problems. That real estate investing strategy consists of buying properties which the investor believes will soon increase in value due to market-wide appreciation. Although this strategy can be used successfully, it is based on pure speculation and can fail. Three investment strategies that are based on fact and not speculation are listed as follows. The first is known as the bargain purchase. Choosing a prorperty using the bargain purchase method will often allow you to buy that property at twenty percent below market value. This allows them to make up to a twenty percent profit using this real estate investing strategy and is a great strategy to use when purchasing foreclosures.
The second strategy is known as the increase value strategy. The property would be purchased at the current market value using this strategy. There must be some improvements that could be done within a six month time period that would increase the value of the building by twenty percent for this strategy to be successful. The last strategy is the double digit cap rate which is the one many real estate investors use. The double digit cap rate strategy is used for buildings that have a capitalization rate of ten percent or more. The net operating income from the property divided by the purchase price is the captalization rate. These are harder to find unless the market is depressed or you are looking into small market niches. Whatever type of real estate investing strategy you choose it is wise to have a real estate agent on your side who can help you make the right decisions and tell you of any new listings, including foreclosures that you may be interested in.
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