Investing in real estate can be a very rewarding experience. My clients often ask me, “What would you do with this condo, house, or fourplex?” The answer is simple. It depends.
The truth is there are different investment opportunities for different people. Buyers are not created equal, nor are their goals. Below I illustrate a few different approaches to investing in real estate.
I’m a first time homebuyer.
If you’re in the housing market for the first time, it’s important to have the proper guidance so you can be fully protected and advised. If you’re single or can get away with a small amount of space, you can pick up a small condo or home and begin to build some equity, while keeping your payments low for yourself. There are many opportunities in San Diego where you can find a buy a condo or small home with as little as 3.5% down (FHA Approved) and have your monthly payments be equal or very close to your current monthly rental expenses. In other words, you can start paying yourself instead of your landlord. Not only will you benefit from tax breaks, but it’s a great time to pick up a good deal and build equity as the economy starts to rebound and rebuild.
I’m a cash buyer.
If you’re looking to buy a place for cash, then you need to identify the places that will give you the most return on your money, and also be in an area that will grow in the years to come. In today’s real estate downturn, cash buyers are king, and they can demand the best prices and for the best terms. A good way to locate a prime location to invest in is to see what the trends are in the area. Are there new business or restaurants coming to the neighborhood? What reputation does the area have? Is it around other growing communities? Are there any city redevelopment plans? Once you have this info, you can start to identify rental rates and run simple mathematical calculations to see what will net you the most each year for your investment. Of course, there are many other factors to consider, like comps, sales trends, HOAs, etc; this is where a good real estate agent/broker can really come in handy.
I want to flip homes.
For the savvy investor with the vision to remodel a distressed foreclosure property, there are plenty of opportunities. With a record amount of bank owned listings, distressed homes have flooded the market. The ones with the most potential are the ones that need the most work, but since lenders are hesitant to lend on these properties, cash buyers usually consume them. If you’re one of those cash buyers, lucky you! Yes, it is possible to flip homes in this market. If a home needs $50,000 of work, it may be under market by as much as $100,000 simply because it can only be bought by cash buyers, who have all of the cards in their favor. That means you can fix it up and flip it, pay an agent’s commission and still have a nice profit at the end of the day. Flip a few of these a year and you can do pretty well for yourself. I have many cash clients who have had a lot of success flipping homes in this market. Remember to always get professional advice and quotes from contractors when you’re making these decisions.
I’m really rich!
Ok so if these single property investments bore you, you may want to consider buying a bank owned apartment complex, between 20-100 units. Buying in bulk works just like Costco. You end up paying a much lower per unit cost than neighboring condominiums. Since you are buying these for rental income to start, you can simply take them over, remodel them and demand higher rents in the short term. In the long term, you can convert the complex into condos and sell individual units for huge returns. Then you can roll those profits into an even larger complex.
Want to discuss your personal real estate investment goals? I’m happy to help.
mobile: (619) 955-7706