Everyone has seen the TV shows where somebody buys a house that needs repairs then fixes it up and sells it for a big profit. This is only one type of way to invest in real estate.
Real Estate Investing is an investment where real estate is involved in some capacity. The objective for each type of investment can be quite different. Here is a brief overview of some of the more common types of real estate investing strategies.
1. Buy, Fix and Sell – This is probably the most common real estate investing strategy. You buy a rundown house for dirt cheap. Then you fix it up and sell it for a profit. Your commitment to this strategy is usually a couple of months. The risk with this strategy is that it may cost you more to fix it up then you originally thought. A variation on this strategy is that you could also decide to keep it and rent it out. This would require a longer term commitment.
2. Buy, Rent and Manage – This is another common strategy. Your commitment to this strategy is usually many years. With this strategy you are becoming a landlord and will have tenants that need to be taken care of. There are more risks with this strategy. Most of the risks are associated with tenants. Will they pay their rent on time? Will they take care of the property? There are other risks? Will rent prices change? What if the roof needs replacing? What if you have a fire?
3. Lease Options – This is not as common but there are a lot of people doing it. This is where you buy or lease a property from someone and lease it to a potential buyer. The idea is that you sell it for more than you bought it. The risks are reduced because the tenant buyer will take better care of the property because they hope to buy it someday. Even if the buyers walks away, you could also find another buyer and start the process all over again.
These are some of the more popular strategies. Other strategies exist where you can find deals and assign them to other investors. You could be a mortgage lender and provide money as second mortgages. You could even buy notes (second, third, etc. mortgages at a discount price.