A hammer is a great tool for nailing a piece of wood, but it is not very effective if it is used as a saw. There is a fundamental difference between the effectiveness of a real estate investment strategy and its suitability to achieve a particular goal and is often ignored with serious consequences.
There are several types of real estate investment strategies.
As an investor, you can consider wholesale as one of the initial and low-risk investment strategies. These properties are sold by other investors. Typically, what the seller wants to do is sell the property “as is” to receive quick money.
The goal in wholesale is that you never have to put the house to your name or even put money into the business. You find a property, place it under contract and finally sell your position (transfer of contract).
Sales in Short
You must understand the process of short sales, another of the strategies of investment very used today. With short sales, you have to communicate and get along with the seller, the bank and the real estate agent who can help provide you with the value of the home. It is a process in which the seller can no longer afford to pay the mortgage that his debt is usually more than the value of the house. They can negotiate a short sale rather than go to foreclosure.
This can be a win-win for all who are involved. The seller can get out of a mortgage that he or she can not afford without damaging their credit. The buyer will get a house below the average sale in the market. The lender will leave the loan that is not bringing money. This is also a low-cost way for the lender rather than going through the entire process of foreclosure.
The short sale process can easily last up to 6 months and sometimes more. It is for this reason that you should aggressively look for other houses within the area and keep your options open.
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REO (Real Estate Owned)
After the property has continued its course as foreclosure, this returns to the original lender. If you are determined to follow this path, then you will have to deal directly with the banks.
The bank that has already tried to sell it in an auction, but without result. Now he has a house that is not selling and depreciating. The bank prefers to sell it and get it out of the books, but you have to be careful because if you are in an area where there are not many foreclosures and short sales, then you simply do not want to give up the property without making some money.
This type of investment strategies is not suitable for a real estate rookie. Remember that the bank is selling the property “as is, ” and many REOs are in bad condition. You have to investigate and figure out the defects you may have before wasting time.