It’s a common real estate investing question: when and how to buy homes for investment. There are several ways of approaching the issue depending on your goals and financial capacity. Real estate investment deals with buying houses, apartments, condos, and other real property to profit from the money invested. It can be an appealing way to build wealth over time without having to come out of pocket from your initial investment.
Some investors buy real estate to lease them or flip them, while others may use them for rental income. When buying a house, either as a rental or as a flip, sellers often sell to one-third their asking price as a cash deal. This is called “flipping,” and it requires some skill, timing, and knowledge of finding and selling good deals. We Buy Houses buy houses at a substantial discount from their retail value, selling to one requires several non-financial benefits. Cash real estate investors usually don’t have to pay brokers’ fees, set up the financing, deal with real estate agents, or do any other various things involved in selling houses.
Some investors choose to be flippers, meaning they take the property they purchase for sale and immediately put it up for sale in the real estate market. A good flipper must know which properties will sell fast and which will sit on the market for a while. Being a flipper means you have to be willing to hold onto properties for a little while longer than other real estate investors would. This strategy can be lucrative, but it does require you to have some savvy and a lot of patience.
Most traditional lenders have no interest in financing real estate deals that involve short sales, foreclosures, or short sales. For them, this represents a risk-equity ratio that is too high. Because of this, many private lenders and credit unions do not provide real estate financing to individuals unless they are wealthy. The few institutions that offer such loans are often only interested in loans to people with positive credit histories, possess low debt levels, or are experienced investors.
A few investors have managed to obtain the mortgage or financing they need to become qualified to buy houses through traditional methods, but they still have a long way to go in terms of cash flow. The conventional real estate market has several options available to investors. These include leasing houses and selling them as rentals or using them as investment properties. A few investors have tapped into the capital markets to purchase houses and sell them for profits, making a tidy profit from the rental or sale side of the house while paying a small maintenance fee to the lender. In this manner, investors make money by leasing houses and collecting rental or sale payments.
An alternative to acquiring a house is to use an investor to buy houses from the cash offer. This arrangement can reduce cash outlay requirements because sellers will often agree to discounts to sell their property. The seller will then return the cash offer to the investor after taking care of expenses such as taxes, home inspections, marketing, and repairs.
Some real estate investors choose to use a wholesaler instead of using a broker. A wholesaler can provide them with the services needed to find and buy a property at the right price. Although some wholesalers are directly involved in buying and selling houses, others act as intermediaries that facilitate transactions between investors and lenders. A wholesaler can also take care of all the legal issues that may arise during the course of a real estate transaction.
If you plan to use a real estate agent to help you buy your house for cash, you should keep in mind that this option usually involves long hours of work and maybe costly. Real estate agents work on commission and can impose very high fees for houses that sell quickly. They also may not have access to properties that you are looking for. If you decide to go this route, ensure that you are working with an experienced wholesaler who can efficiently and effectively represent your interests.