Thanks for your question, Lew! There are several additional questions that you would need to answer for yourself in order to determine how to proceed in your buyers’ market. For starters, ask yourself how much cash is considered “suitable?” If you want to flip houses for a fast profit, then a “suitable” amount of cash could be only a few hundred dollars to cover a small earnest-money payment to a motivated seller, your inspection and appraisal, and various miscellaneous costs include having a real estate attorney review your contract to make sure it protects you during the transaction. Most investors who flip properties do not ever actually close on them, but instead assign the purchase contract to another investor or an end-buyer and take their payment either when the contract is purchased or, more commonly, immediately after closing. If you do not even have a couple hundred dollars, you could “bird dog” for another investor, meaning locating potential deals for that investor and receiving a fee for your services in providing leads on deals. If you have more cash on hand – say several thousand dollars – you might opt to get involved in creatively-financed deals wherein the seller finances the purchase of the property or you buy a property subject to the existing mortgage and catch up payments, if appropriate. These types of deals often require a down payment in some form, so you might need a little more money in order to get the deal done. These deals are ideal for both long-term holding as rentals or for flipping to other investors. Just make sure that you run your numbers ahead of time to make sure that the deal will be attractive once your fee is included in the purchase price if you plan to flip. Finally, if you have extremely sound credit and enough money for one or more down payments on conventional home purchases, you might want to take advantage of that buyers’ market to invest in multiple rental properties. There are rental investment firms that will help you finance these purchases or you can even purchase properties outright, depending on your funding. Long-term rentals are a great option for today’s real estate investor because the rental market is booming with rising rents and a new, higher caliber of renter who wishes to rent and remain in the home long-term. Many renters are actually interested in purchasing their rentals at some point in the future, which positively affects how they maintain the property and treat your real estate.
Once you have a clear idea about your budgetary options in this buyers’ market, the time has come to evaluate your target market. Not every housing market is conducive to every form of real estate deal. If your local market will not permit you to flip, for example, you might seek deals elsewhere. Many flippers find their properties online and work with a local individual to “vet” them and ultimately get them assigned to other buyers. These flippers may never see the properties themselves. If you are interested in rentals, then you should definitely identify “hot” rental markets where you can get great deals on properties but also easily lease those properties once they are in your possession. This may require networking with other investors outside your geographic area or using the internet to locate motivated sellers, get financing in place, and then lease out your properties.
It the term “suitable amount of money” refers to enough money to invest in rental properties, then at this point in timeBEIL believes that rentals are probably the way to go for most investors. Of course, every scenario and situation is different, and you should consult a financial professional before investing your money anywhere. This article is purely educational. Here are a few reasons that we think rentals are a great investment these days:
Renters are less likely to default than ever
Recent studies indicate that renters – particularly those who rent single-family homes – are less “risky” than they have ever been before when it comes to sticking to the terms of their leases, paying on time and in full, and renewing contracts.
Rental rates are rising in most areas of the country
In some cities, rental rates rose by nearly 30 percent in 2012. While this type of growth is not likely to continue, lower rates of growth are likely moving into the future as more and more individuals become renters thanks to difficulty getting home financing, fears about foreclosure and the future, and a general mindset shift when it comes to renting vs. ownership.
Rental properties are relatively easy to come by
In many “hot” rental markets, rental properties are still relatively easy to locate, purchase, and lease out. Of course, as more investors get involved in this market sector, prices on rentals could rise faster than on other types of homes. Right now, you can still purchase rentals relatively affordably and rent them out relatively easily. There are also highly effective, reputable services that will help you locate, purchase, lease, and manage rental properties if you wish to be a more “hands-off” landlord.