Real estate investments can help individuals develop a solid financial portfolio and a steady cash flow as long as decisions are well thought out. In today's market, making smart investment choices can be challenging. As real estate prices continue to decline valuable opportunities arise, but it takes strategic planning in order to capitalize.
Before diving into
real estate investments, it is important to decide which best suits your lifestyle. Do you want to purchase rental properties? If so, are you prepared to deal with tenants who do not pay on time or violate terms of their lease? Or, would you prefer to use the property as a short-term vacation rental which requires ongoing cleaning and maintenance? Perhaps, you would rather buy homes and offer them as rent-to-own.
There are as many different types of real estate investments as there are properties for sale. Many investors purchase distressed properties for the purpose of
house flipping. This type of investment property requires locating homes priced well below market value such as foreclosure or bank owned properties. Distressed properties generally require repairs and renovations. Oftentimes, repairs cost considerably more than anticipated and cut into profit margins.
Foreclosure real estate is sold through public auctions. Oftentimes, foreclosure homes have a second or third mortgage, along with creditor or tax liens. On occasion, the borrower still resides in the house and buyers will be responsible for commencing with eviction action.
If no one buys the property it is returned to the lender who carries the first mortgage note. Once the lender takes possession of the property it is referred to as bank owned or real estate owned (REO).
REO properties are usually priced higher than foreclosure homes; however, the mortgages and liens are removed, borrowers are evicted, and the home has a clear title.
Bank owned properties can be purchased through the bank's loss mitigation department. Purchasing REO homes is usually more involved and may require multiple counter-offers to acquire the property. Since banks incur a loss on the property they can require extensive negotiations to obtain a good return on investment. If investors cannot obtain a decent price for the property they should be prepared to walk away.
Probate properties are a relatively unknown investment opportunity that can potentially yield a high profit margin. Probate real estate is property once owned by a person who has died. Probate is the legal process used to validate the decedent's last will, pay outstanding debts, and distribute remaining assets to designated heirs or beneficiaries.
The
probate process can take several months to settle. The decedent's estate is responsible for costs associated with real estate throughout probate. When estates do not possess the financial means to pay expenses the estate administrator can sell the property.
In order to locate probate real estate, investors must review public records at local courthouses where probate matters are handled. Decedents' last will and testaments are public records and contain contact information for the estate administrator along with a list of estate assets.
Although the housing market is currently unpredictable, experts agree prices will stabilize by the end of 2009. Individuals contemplating building an investment portfolio would be wise to begin laying the foundation now. Take time to become educated about various types of real estate and financing techniques to reduce risks and increase potential for profit.
Simon Volkov is an established real estate investor residing in southern California. He specializes in helping homeowners avoid foreclosure, structure short sale deals, and liquidate real estate held in probate. Simon offers a wide range of investment opportunities to real estate investors across the nation. Learn more about the multitude of services offered by visiting
www.SimonVolkov.com.
