Real Estate Investing Strategies

Developing real estate investing strategies is an integral part of every investment plan. In today's uncertain market, deciding which strategies to use can be challenging. The primary purpose of investing is to generate positive cash flow on a consistent basis. Investing in today's real estate market requires careful consideration and thoughtful planning.  

It's best to incorporate real estate investing strategies that are proven effective; especially when starting out. Once investors obtain positive results from their efforts, they can gradually incorporate new strategies to build their investment portfolio.

While some investors have struck gold with real estate in the past, there are few get-rich-quick opportunities in today's market. The best approach is to develop short- and long-term goals and diversify investment products.

Let's review some of the most popular real estate investing strategies that can generate a good return on investment.

Foreclosure real estate can consist of residential homes, commercial real estate, and vacant land. Foreclosure properties can be purchased at public auctions or through banks. Once mortgagors default on their mortgage note, banks must follow specific protocol to repossess the property.                             

Real Estate Foreclosure Auctions

Foreclosure properties are first placed for sale through public auction. Buyers attend auctions or submit offers over the phone during the auction. Investors who are unfamiliar with foreclosure auctions should attend an auction to observe the process and understand how things work.

Attendees usually have to pre-register to attend public auctions. Some auction companies charge a fee, while others grant free admission. Buyers normally must remit payment in full for properties purchased within 24 hours. Understanding the auction company's terms prior to attendance can help real estate investors obtain the investment properties they desire.  

Buying Bank Owned Real Estate

Buying bank owned real estate is more time-consuming than attending public auctions. However, investors can avoid some of the complications that can arise from buying auctioned real estate.

For example, some states allow property owners to buy their house back after it has been sold at auction. Once banks take possession of the property, property owners lose their right to reclaim the foreclosed real estate.  

Bank owned properties are sold with a clean title and unencumbered from tax liens, creditor judgments, and second mortgages. Banks take care of evicting foreclosed homeowners. Investors buy the property from the bank and take quick possession without having to deal with the sometimes messy procedures associated with properties sold through auctions.

Bank owned real estate is typically priced higher than properties sold through auction. However, since the title is clear, investors can take possession and move forward with their plans for selling, rehabbing, or renting the property.

Investors submit bids through the bank's loss mitigation department or an assigned real estate agent. Banks rarely accept offers for less than the asking price unless substantial damage is discovered during property inspections. The process of buying bank owned real estate normally takes 2 to 3 months to complete.

Short sale real estate is property that is in foreclosure, but lenders have agreed to allow mortgagors to sell property for less than is owed on the mortgage note. Most banks require borrowers to have a buyer in place before entering into a short sale agreement. Others grant borrowers' time to list their property for sale through a realtor.

To buy short sale real estate, investors must submit offers through bank loss mitigation. Banks require buyers to obtain prequalified financing, unless paying with cash. The process of buying short sale properties is complex and usually takes 3 to 4 months to complete.

Investing in probate real estate is a virtually untapped niche. Those who take time to learn the process can potentially generate substantial profits. Probate real estate encompasses properties which belong to a person who has died.

Probate is the process used to settle decedent estates. When real estate is secured by a mortgage note, the estate is responsible for remitting payments, property taxes, and maintaining the property until the probate process is complete. When estates are financially incapable of paying loan payments, a probate judge can order the property sold.

Estate executors can elect to sell probate real estate that is owned outright. Many reasons exist for liquidating estate property. Sometimes probate real estate must be sold to pay outstanding debts. Other times, estate executors elect to sell probate properties because heirs desire cash instead of real estate.

The way probate real estate is sold depends on probate laws in the jurisdiction where property is located. Some states require investors to submit bids through the court, while others allow investors to present offers through the estate executor.

Owner will carry is becoming a popular real estate investing strategy for selling investment properties. Investors have utilized seller carry back mortgages and rent-to-own agreements for years, but the need for privately financed loans has soared due to the massive number of property owners who have lost their home to foreclosure.

Once a person loses real estate to foreclosure they typically cannot obtain bank financing for at least 2 to 3 years. Most people who have owned a home find it difficult to become a tenant. They long for the freedom of owning a home.

Offering owner will carry financing allows investors the opportunity to generate positive cash flow and retain long-term tenants. Buyers pay monthly rent while working toward purchasing the property. Investors and buyers enter into a purchase contract that usually extends for 1 to 5 years. Buyers provide a down payment to secure the real estate for sale and a portion of monthly payments are contributed toward the purchase price.

A variety of owner will carry agreements exist. Some of the more popular include seller carry back mortgages, lease purchase option agreements, and rent-to-own contracts.  

Investors who take time to research the different types of properties and develop solid investing plans can achieve the success they desire. Before ever spending a dime on real estate, do yourself a favor and become educated about the various real estate investing strategies.