Types of Investment

House "flipping" has been a buzz phrase in Real Estate for a few years now.  Like everything else it has pros and cons. Flipping is essentially converting a property in disrepair to a home that can draw top or near top market value.  The property is usually purchased at a discount.  Investors look at a flip opportunity by considering how much they can purchase it for (X) and how much it will cos to repair (Y).

 X + Y =  Total investment. (Z)

Then a thorough analysis is done to determine what the property would sell for after all repairs (ARV-After Repair Value).

Most Investors have a "30%" rule.  in that ARV must be  30% > Z

This is the most popular form of real estate investment.  Its popularity is because of several things.  one, is because it  is easy for most people to understand how it makes money.   Most of us have been a tenant in a rental relationship before so we have some experience paying the land lord.  

another reason this is a popular method is it has fewer marginal risks than other forms of RE investment.  If you have a good Realtor who knows property and market values then purchasing property for rent is relatively safe.  Holding rental property also helps increase your net worth.  As your assets appreciate in value your overall worth goes up.  This is  a tired and true method for the novice and experienced investor alike. 

Definitely one of the most lucrative forms of real estate investment.  Multi family has the potential for very high ROI  (Return on Investment).  Many of the mid to lower level of investors will be leery of investing  in multi-family.  It seems beyond their ability or perhaps too expensive.  Most Multi-Family projects have partners to offset the initial investment.  And  managing them is not much different from managing single family property.  Especially if you utilize a management company.   Another thing that puts the average investor off from Multi family is they get intimidated by the acronyms. "CAP rate", "NOI".  These are merely indicators of the financial health of an investment.  You can find a complete definition of these terms in the glossary.  If you think Multi-family is too much for you to handle, talk to one of our consultants and lets see if your concerns are rooted in fact or misconception. 

This is a very simple form of Real Estate Investment.  Someone has raw undeveloped land for sale (EX: $100,000) and you Think in the next 10 years it will be worth ($200,000), based on development models in the area.  So you buy it and hold it until it is profitable to sell.  Or you buy the land with the intention to sell it to a developer for an immediate profit.  

Once you have bought the land, you may employ a developer to help you put something on the land.  In many cases this is a Multi-family unit or retail spaces or both.  Many think this route is beyond their financial capabilities, but there are many creative ways to get in on the action.  We work with many developers who would be excited to show you how you could get in this game.  

There is no right or wrong answer.  And Usually people find their comfort zone in a certain combination of several.  It is important to be knowledgeable about all types of real estate investment because a good deal can come in many forms and you don't want to miss out on money because you did not know enough about a certain type of investment to be comfortable  making the commitment.