Investors who buy homes have an abundance of properties to choose from. Today, real estate investments range from dilapidated shacks to mega-mansions once owned by the rich and famous. The variety of available real estate offers both novice and seasoned investors many opportunities to cash in on the bounty.
Foreclosure homes are a popular choice amongst investors who buy homes. Considering there are millions of foreclosed properties sitting vacant, real estate investors can choose from a wide range of houses which can be used as rental homes, wholesaling or house flipping.
Investors willing to rehab houses can yield tidy profits in the long run. Rehabbing is not easy and generally requires hiring a crew of contractors and general laborers. Investors who enjoy hands-on work are oftentimes attracted to distressed properties.
Many newbie investors purchase rundown houses with the intent of performing repairs and renovations on their own. While it can be rewarding to convert an ugly house into a beautiful, updated home most people do not fully comprehend the level of work required to rehabilitate a house.
Rehabbing houses can only be profitable if investors are able to perform work quickly and either rent the home or sell it to another buyer. The longer the house is “in-progress”, the less profit will be made. If you plan to enter this real estate arena, hire an experienced crew and allow your new investment to make money instead of cost money.
Some investors purchase bank owned homes; also known as real estate owned. REO properties were once foreclosure homes that did not sell at auction. When no one bids are placed on foreclosed property, ownership of real estate reverts to the bank. The property is then sold through the lender’s loss mitigation department.
Bank owned homes are typically priced between 5- and 30-percent below market value. Much depends on the balance of the mortgage note, condition of the home, and comparable sales in the area where the property is located.
REO homes generally require repairs. Many need major upgrades such as installing a new roof, drywall replacement and painting, carpet and flooring, and new appliances. Buying bank owned homes can sometimes be a frustrating and drawn-out experience. If you plan to buy homes from banks, plan on engaging in multiple counter-offers and be prepared to walk away if the bank isn’t willing to budge.
Some investors who buy homes specialize in wholesaling. This technique is simple and requires less work than most types of real estate investing. Wholesaling involves buying a home well below market value, then reselling it “as-is” to another buyer. Profits can range between 1- to 60-percent, or more.
Many real estate investors purchase homes for rental properties. Rental homes can be multi-purpose. Some investors engage in long-term rentals and offer tenants the option to buy the home at the end of their lease. Others engage in short-term or seasonal rentals. It’s not uncommon for investors to purchase a vacation home and lease it out when not in use.
Another niche investors who buy homes are engaging in is short sales. When borrowers are facing foreclosure, some lenders allow them to sell their home for less than they owe. In some cases, investors can purchase short sale homes for pennies on the dollar.
Probate real estate can be a good choice for investors who buy homes. Probate properties include real estate owned by someone who has died. During probate, the decedent’s estate is responsible for all expenses related to the real estate. These expenses can quickly deplete estate financial holdings, so probate executors sometimes elect to sell the property.
It is not uncommon for probate real estate to be in good to excellent condition. If the decedent owned the property outright, probate executors will oftentimes price it cheap just to eliminate the headaches.
Investors who buy probate houses can locate potential properties by searching courthouse records. The sale of probate real estate is usually handled by the estate administrator and occasionally requires approval from the court.
If you are considering a career in real estate investing, take time to become educated about all areas of this multi-faceted business. Investors should become familiar with local real estate laws, understand financing options, and thoroughly understand their chosen market.