Buy and Sell Versus Buy and Hold Real Estate Investing Strategy

Buy and sell and buy and hold are the two commonly used real estate investing strategy. When it comes to choosing between the two, you have to consider the method that will help achieve your financial goals. In this article, we will tackle these two methods in detail.
Buy and sell real estate

A perfect example of buy and sell is fix and flip. It is extremely popular today. In fact, a lot of TV shows highlight fix and flip and it is endorsed by famous celebrities. If you are looking for a quick profit, then this strategy is perfect for you. How does it work? You have to look for properties that are undervalued but are situated in a growing neighborhood. The best properties are the ones that don’t require that much repair. They can be sold right after the renovation. With a fix and flip strategy, there is a lot of work to be done. To speed up the process, an investor works with other people such as real estate agents, builders, contractors, and so on.

Areas to focus on when using buy and sell method

1. Budget – To execute the renovation task properly, you need to have a large sum of cash. If you don’t have enough money, don’t worry as there are other ways to fund your flipping project. You can partner with other investors or borrow money from moneylenders. However, hard money lenders and portfolio lenders offer a high-interest rate. If you want to maximize your profit and execute the flip the soonest time possible, you need to have available cash at hand.
2. Repair – The renovation process can take up a huge chunk of your budget. Hence, it is important to find an undervalued property that requires less work. You should focus on the key areas of the property such as the kitchen and bathroom. Stay away from properties with structural damage as they can be very costly to repair. Focus on properties that only require cosmetic updates such as flooring upgrade, new paint, replacing the carpet, and so on. These things are not that costly but can surely add value to the home. Through these improvements, you will be able to sell the proper at a higher price.
3. Risk – There is no such thing as a risk-free investment. To minimize the risk, you need to carefully choose a property, weigh the risk and reward, and have an effective exit strategy. If you don’t have enough money to handle the renovation cost, then you can always borrow. However, you need to make sure that you choose the right funding method.
Buy and hold real estate
This strategy does not only work for stock market investing but also for the real estate. With this strategy, you can make money through cash flow and appreciation. Investors choose a property in a stable neighborhood. There are factors that need to be considered when selecting a property for buy and hold. These are:
• Growth potential
• Employment statistics
• Average rental price
• Median income
• Proximity to schools, hospitals, malls, market, and church
• Crime rate

How does buy and hold real estate strategy works?

Once you found an ideal property, the next step is to choose the best funding strategy. If you have enough cash, the funding won’t be a problem. However, if you have a limited budget, you need to come up with the best possible way to fund your investment. What most people do is they use other people’s money. You apply for a loan with 20% to 30% down payment. Depending on your investment goal, you can set up the term, which is usually 15 to 30 year-loan. If you invest in the right neighborhood and you have the best tenant, you don’t have to personally pay the loan and other related expenses because they are paid for by the cash flow generated through the rent.
What are other relevant expenses? The truth is you can rarely find a flawless property. Most of them require some sort of renovations. However, with the buy and hold real estate method, the renovation job is minor and focused on enhancing the appeal of the home to renters. The renovation task is done as quickly as possible so that tenants can come in and the property starts generating cash flow.

How to generate profit through the buy and hold real estate strategy?

1. Monthly rental, which helps cover the expenses and mortgage
2. Appreciation
What to keep in mind when using buy and hold real estate method?
• Invest in the right neighborhood. Do a thorough research of the neighborhood and work with the best team.
• Choose a strategy that helps meet your investment goals. There are many real estate investing strategies out there, but when it comes to making your choice, you need to consider your financial goals.
Buy and sell and buy and hold real estate strategies do have their pros and cons. Buy and sell or also known as fix and flip is perfect for people who like to take on bigger risk in exchange for quick profit. On the other hand, buy and hold is perfect for investors who like to take a lower risk and stable gain.

Top 3 Real Estate Investing Strategies for 2017

Are you planning to invest in the real estate market this year? If yes, then you need to know the common real estate investing strategies. These strategies are used by successful investors. They made a lot of money using these strategies and you can too. Just learn the ins and outs of the real estate business and choose a strategy that fits your financial goals.

 

Image result for foreclosed property

Buy and sell/flipping

This is by far the most popular real estate investing strategy. A lot of TV shows feature house flipping. It is where an investor buys a foreclosed property, renovate, and relist the house in a short period of time. The investor will look for an undervalued property so that he can have enough money to fix it and eventually sell the house at a much higher price. Flippers look for:
• Foreclosed properties
• Foreclosed auctions
• Home from tax auctions
• Straight from the seller/owner
In a flipping method, everything is done in a short time frame to make a large lump sum of cash. Usually, investors try to complete the flipping project in less than a month.

Buy and hold/renting

Image result for buy hold renting

You purchase a property and rent it out to someone else (good tenants). There are many ways to invest in the real estate using buy and hold method. If you don’t have enough money, then you can apply for a loan. It will require 20% to 30% and the rest is financed by the lending institution. It’s up for you to decide how many years you are going to repay the loan including the interest. You can choose between 15 to 30 years. Once you found a good tenant, repaying the loan won’t be a problem because you are going to use the rental money to pay for the loan. The key here is to improve the property to make it appealing to tenants. You also need to screen your tenants to make sure that the monthly rental fee is paid on time and your property is well taken care of. Over the years, the market value of the property increases. If you need a huge amount of money, you can sell the property and take advantage of appreciation.

Wholesaling

 

Wholesalers find deals for other investors. They get the house under contract and assign or sell it to another investor. Wholesalers scout for rundown properties in a stable or growing neighborhood. They will contact the homeowners and ask if they want to sell their house. The purpose of wholesaling real estate is to find great deals even before the property is made available for the general market. Basically, wholesalers have a list of buyers who are looking for flipping worthy properties. The typical market is house flippers. Wholesalers do not make as much money as house flippers and rental property owners. But they get to make quick cash the moment they find a buyer. Wholesalers usually make $5,000 to $10,000 per deal. If you close multiple deals in a month, you get to enjoy a huge profit without doing all the hard work. You don’t even need a lot of money to become a wholesaler.

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Basically, these are the three of the commonly used real estate investing strategy. There are a lot more, but this year, these three remain on top of the list. Which of the three should you choose? Well, it all depends on your skill level, budget, and financial goal. You can even try other real estate investing methods such as crowd funding, a real estate investment group, real estate trading, and real estate investment trust.

The Future of the Real Estate Industry

Real estate investors do not only look for profit potential, but also consider the risk that comes with the property. The real estate market trend should be considered too because it can directly affect the investment strategies used by investors. Let us take a look at where the future of real estate industry is heading on this year.

Millennial home buyers are the primary market

Real estate is primarily dependent on the supply and demand. This year, the majority of the real estate market is millennial home buyers. These are people born from 1980 to 1999. This year, more and more millennials are looking for a place to call their own, which also means that the demand for homes will increase significantly. Millennial buyers are here to stay, not only this year but for the years to come. They will remain a big chunk of the population.

Increase mortgage rates

Mortgage interest rate is on the high side and will continue to increase for the years to come. However, the increase in mortgage interest rate is slow and not in any significant amount. It will require a consistent economic growth and inflationary pressures to have a significant increase in interest rate. The interest rate for a 30-year fixed mortgage is in the 4% to 5%. The increase in the interest rate is not likely significant when compared to the overall home buying market. It could somehow affect the low end of the market, especially the first time homebuyers.

Easy credit access

The deregulation of the financial market has led banks to become lenient for credit borrowers. Easy credit access is beneficial not only to home buyers but also for real estate investors. The availability of credit along with rising interest rate and increased demand for new homes could significantly put inflationary pressures on home prices.

Continuous home price appreciation

There is a continuous home appreciation, not only this year but for the years to come. There will be a 3.9% growth year after year, as per the Realtor.com 2017 Housing Forecast. Some regions will have a higher rate such as in Denver, Portland, and Seattle. The west part of the United States will have a stronger appreciation compared to other parts of America. Home price appreciation is caused by employment growth. Thanks to the increasing demand for skilled employees.

Are there any downsides?

There is no such thing as a risk-free investment. This principle does not only apply to the real estate, but in all other types of business. As a smart real estate investor, you need to be prepared for the downside risks. Factors like political uncertainty, terrorism, and conflict of interest in the country and international trade could significantly impact the economy. The rise in the value of the dollar can affect the export industry, which also has an indirect effect on the real estate industry.

Overall, the future of the real estate industry is going to be great this year and for the years to come. Prices will continue to rise but at a slow pace. Mortgage rage will be volatile, but the credit availability will significantly improve. The housing supply will improve significantly but still remains short because more millennials will be looking for rental properties and most of them are first-time home buyers too. As the demand continues to increase, the competition among real estate investors will grow fiercer. Last year, typical properties stayed on the market for about two months and predicted to be even faster this year. Politics has something to do with the future of the real estate industry. President Trump’s policy priorities can significantly affect the housing market. The president pledges to cut taxes, spend more on infrastructure, and crack down on immigration. Any move in these three areas can somehow impact the real estate market.

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