Real estate investment strategies have undergone major changes over the past four years. Prior to the banking crisis and economic recession, many investors generated massive profits by rehabilitating distressed properties and engaging in house flips. Today, investors are using distressed properties to generate rental income or to provide creative financing options.
The first step to a successful real estate investment is to learn about the market. Investors should familiarize themselves with the different types of investment property such as residential, commercial, and vacant land, as well as investing in real estate notes and land contracts.
Residential real estate can be used as rental properties or offered for sale. Many investors come up with creative financing strategies to attract buyers who cannot qualify for bank financing. Popular financing options include lease-to-own option agreements and seller’s deferral mortgages.
Commercial real estate includes a wide range of properties such as condominium and apartment buildings, retail stores, warehouses and office buildings. Investors often partner with other investors or investment groups when purchasing commercial property to cover the costs and management tasks required to maintain investment properties.
Commercial real estate has the potential to generate substantial profits as long as investors assess market conditions. Investors may be eligible for tax incentives when business investments create employment opportunities in the area or when properties are upgraded using energy efficient technologies such as solar panels or other forms of energy green.
Investors often seek out foreclosure properties held by banks, as this type of real estate is usually priced well below market value. Bank-owned real estate encompasses all types of properties and can range from mobile homes to swanky high-rise apartments and industrial parks to golf courses.
Locating residential and commercial foreclosures is relatively straightforward. Using the services of a real estate agent can speed up the process. Agents can access the Multiple Listings (MLS) database to quickly locate all types of properties for sale.
Once the banks repossess the properties, they are first put up for sale through public or government auctions. The property is returned to the bank if it is not sold at auction. Banks then sell foreclosed properties through their loss mitigation division or local estate agents.
The prices of properties held by banks are generally higher than those of properties sold at auction. However, banks remove liens and judgments in order to sell the property with proper title. Buyers are able to take possession quickly and can move forward with preparing the property for sale or rental.
Many investors buy residential properties through Fannie Mae’s Homepath Mortgage program. In addition to selling homes at deep discounts, Homepath Mortgage offers low down payment requirements and special financing options for individual buyers and real estate investors.
Many Fannie Mae properties are eligible for grants offered by the HUD Neighborhood Stabilization Program. NSP grants are offered to improve properties located in areas with high rates of foreclosures. Accredited investors can obtain up to five NSP grants.
Investors investing in commercial real estate should educate themselves on federal, state, and county property laws. Commercial buildings must comply with the Americans with Disabilities Act and be zoned for commercial use.
Although the real estate market continues to sink into a downward spiral, there are still plenty of solid investment opportunities. Investors need to keep abreast of market conditions and be able to change strategy when needed. Otherwise, they will quickly become another real estate statistic.