This is part one of our series on formulating a real estate investment business plan
I’m not going to tell you that there are complex strategies that only
professional investors and real estate agents know, because there aren’t. Real estate investment is all about finding properties that are able to be purchased for a price that is below their market value – for whatever reason.
There are strategies to keep in mind when making your business plan. The most important and crucial one is to remember that when you invest, you are looking to buy at a low price and sell at a high one. Look for properties that are at least 20% to 70% below market value. Whether you decide to rehab, flip or lease your properties, when you buy them at discounted prices, you know that you have built in equity.
When you are making these decisions, you need to choose wisely, do your due diligence and always ask questions. Not every deal will be the right one for you. Knowing when to say no is something that every successful real estate entrepreneur and investor learns quickly, because it is better to be sure than to make a huge mistake down the road that you might regret and end up paying for many years later.
Getting Started with Distressed Properties
Distressed properties are the dream come true for investors because they can be purchased at deep discounted prices. Many can be bought for as much as 40% to 50% or more below market value. Distressed properties are foreclosed homes, REO’s and pre-foreclosure short sales.
Distressed properties are considered distressed because the borrower is usually in some kind of financial distress and about to default on their mortgage or they have already defaulted and may be heading towards a foreclosure. There may be many reasons why the seller is in financial stress such as a job loss, illness in the family, one of the property owners died, divorce, job relocation or other reasons.
Keep in mind that when you purchase a distressed property from a seller that is still in possession of the property that you are helping the seller so that they do not lose their home to foreclosure and ruin their credit. Be sure to stress this when you meet with them. Listen and be patient. It is a difficult choice for an owner to let go of their most valuable asset.