Building Your Investment Capital by Flipping Real Estate

There are many different options available to you if you want to make money from investing in real estate. Here we look at some of the strategies you can use to successfully invest in real estate. 

The most obvious approach to real estate investing is where an investor buys a property for the long term. The major objective of many long term property investors is to provide financial security over the longer term. This strategy involves buying a property, renting it out, and using the rental returns to pay off the mortgage over time. 

This usually means that the long term real estate investor is looking at an investment horizon over between 15 to 30 years. This time frame is usually required because this is how long it will normally take to repay the mortgage on the property. Long term investors also expect to make a capital gain on the property when it is eventually sold. While investing in real estate over the long term offers financial rewards and is a viable strategy for creating wealth, especially for retirement funding, the downside is that it can take many years in order for you to realize any gains from your investment. 

Investing for the long term should be a strategy that is used in conjunction with other real estate investment strategies to maximize the earning potential that investing in real estate offers. 

Investing in real estate over the longer term is considered a relatively safe investment option and while it will provide you with capital and potentially a profit when the asset is realized in the years to come, there are other short term options such as the nothing down?approach and short term property speculation, that can provide quick profits for the savvy real estate investor. 

The nothing down?approach is a popular strategy among many investors who are looking for a quick return and who may not otherwise have the capital required upfront to invest in properties over the longer term. As there is a greater opportunity to make a good profit in a short amount of time, this approach carries far greater risk than taking the longer term approach. 

The nothing down?approach involves finding a suitable property that can be quickly resold straight away for a quick profit. Suitable properties may include ones that are in need of some repairs or where the owner needs to sell urgently due to circumstances that may include financial difficulty. Using the nothing down?approach, the investor may agree to buy a property, and then sell it again to another investor or owner-occupant straight away. 

As the nothing down?approach suggests, the investor does not use their own money to purchase the property but uses the funds from the sale they have made to the third party to pay for their purchase of the property. They then keep the difference between the price they paid and the price they on sold the property for to the third party. Another nothing down approach is to borrow 100 per cent of the price of the property, and then quickly sell it to make a quick profit. This may sometimes include making some repairs or generally cleaning up the property before selling it. 

Real estate investors using the nothing down approach can make handsome profits because of the volume of investments they are making. However, this strategy does involve risk, especially because of the high level of gearing that is often involved. If something goes wrong, such as a rise in interest rates or a downturn in the local real estate market, then the nothing down investor could find themselves in real difficulty. 

Speculating on property is another strategy that the savvy real estate investor can use to turn quick profits on real estate. This approach involves searching for properties that have the potential to be resold for a profit. Some of the reasons that a property may be able to be quickly turned into a profit include:

• changes to local rezoning laws
• the establishment of nearby developments
• a motivated seller due to financial difficulty
• an expected upturn in the local property market
• a property that is need of a some maintenance, repairs or cleaning.

Property speculating, like the nothing down?approach, allows the investor to turn a relatively quick profit, as apposed to the long term investor. But like the nothing down?approach, property speculation also carries a higher level of risk. This investment approach requires a good understanding of the local real estate market and a good eye for knowing how much time and money will be required for any repairs or renovations that a property may require in order for it to be easily resold. There is always the risk that the investor will lose on a particular property for any number of reasons, and this should be a factor that the investor always considers when investing. It is often rare for investors involved in property speculation to make a profit on every deal that they make. 

All these are legitimate strategies for investing in real estate. By using the nothing down?approach and property speculation, many investors will then use some of the profits made to then invest in property for the longer term.

 

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