Investing in Real Estate During a Down Market

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When people think about investing they almost always reference the stock market which I would say if fairly typical. In the past the stock market has been considered one of the best investments out there, especially if you’re planning on investing for any decent amount of time. With the current state of the economy however stocks have been a more risky investment and people are looking for some other options to invest their money. They always say that when one type of investing is down, another is up and it this case that investment type is real estate. With such a large amount of foreclosure going up for sale you can now purchase real estate at a very low cost and from there you’ve got quite a few ways to leverage that real estate to make money. Today we’re going to take a look at two of those ways.

Buy – Renovate – Sell

This is one of the best investments that works very well in a down market. The basic idea behind it is that you can purchase a distressed property from the bank for an extreme discount compared to what the home would be worth repaired or in a good market. I use the work extreme because I’m seeing homes go for over 50% less than wha they are worth in my area and I’m sure that is the case in most areas at this time. Once you’ve found a home that you feel is worth purchasing and can be resold for a profit you put in an offer. Using a real estate agent to do this is a very good idea, they can offer a lot of good advice during this process. It’s also important to put a budget together on the total cost of repairing the home. This is without a doubt the most important part. Make sure you get accurate and realistic numbers on what the renovations are going to cost. If you don’t you could turn the best investment into one of the worst. The difference between the purchase price plus renovations and the sale price is your profit. In the state I currently live in you can buy quite a few properties for as cheap as $20,000 dollars. The typical repair costs is between $10,000 and $15,000 dollars. Giving you a total investment of around $35,00 dollars. That home can now be resold quickly for a price of around $50,000. That means you stand to make around $15,000 dollars in around 90 days. Not bad if you’re willing to put in the work.

Rental Property

While our first way of making money with real estate way geared towards the short term, buying rental property is definitely more of a long term investment. Depending on your cashflow however you can actually follow the steps mentioned above, and then hold the property to rent out to tenants and let the property appreciate. You wouldn’t however put quite as much money in as mentioned above because tenants tend to be a bit hard on rental property. Typically for rental properties you are looking to find a property that you can buy and move tenants into that will still cash flow every month. That way what is happening is the tenant is actually paying off your mortgage for you. If your mortgage payment on a place is $500.00 per month and you can put a tenant in that property for $750 per month, you would be paying off your mortgage and you’re still making another $250. These are actual numbers from properties that friends of mine own, not made up numbers to make real estate investing look like a good deal.

I don’t want to make investing in real estate seem like this easy way to get rich. It is however one of the best investments for 2010. The trick that even the most seasoned real estate investors will tell you is simple, plan ahead. Don’t get sucked into making a quick decision and if something seems to go to be true, it might be. It’s amazing how many people get excited and forget those simple tricks.

Paul B has been involved in real estate for almost 10 years. During that time he’s seen some of the best investments [] around. He’s even started a website about the best investments for 2010 [] and real estate is definitely one of them.

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Arch. Francis Gichuhi Kamau. (337 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email Telephone +254721410684


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