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Real Estate Investing

Three ways investors make money buying properties

March 14, 2013
The Intelligencer / Wheeling News-Register

Real estate has long been considered a stable investment opportunity. As the economic thunderclouds begin to part, hopefully making way for sunny days again, many folks are willing to give real estate investment a chance. Here are some viable ways to make money in real estate.

Flipping Houses

You don't have to possess Herculean strength to flip a house. Contrary to notions derived from reality television, flipping properties can require very little capital and a relatively low amount of work.

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Stated simply, real estate flipping is the process of finding a motivated home seller, negotiating and signing a contract to buy the property for significantly less than market value, and then selling the contract to another buyer (who is typically interested in improving the property) for more than you initially negotiated.

By having a network of potential buyers already established, house flippers often sell the property quickly for without having much - if any - of their own money tied into the transaction.

The key is having that network of buyers lined up ahead of time to minimize the risk and time involved with the transaction.

Rehabbing Houses

Okay, now we're talking about the projects you've seen on television. House rehabbing is pretty straightforward.

Much like house flipping, investors are looking for houses that they can negotiate to buy for less than market value. However, in this case, they also intend to make improvements to the property in order to sell it for considerably more than they have invested in it.

Some knowledge of home repair is helpful. Many investors choose to hire someone else to do the work, while others do much of it themselves. Either way, you'll need to know how to identify issues and estimate repair costs, since this will be factored into a profitable sale price.

Successful house rehabbers can often make sizable profits without a lot of risk, provided they can sell the property before they must make any payments on the mortgage. Good project estimation and speedy repair skills are key.

Property Rental

Though it requires more capital up front, many investors favor buying single-family homes as rental properties.

If necessary, the investor will make improvements and then rent or lease the home, creating a monthly revenue stream and a few decent tax deductions each year. Furthermore, a substantial profit can be made if the owner decides to sell the property later down the road.

Keep in mind that owning rental property makes you a landlord. You'll need a sound rental contract with your tenant, and you'll be responsible for making repairs that the tenants are not contractually obligated to administer themselves.

If you're not comfortable being a landlord, talk to your real estate agent about how to find a property management company that can do many of the day-to-day landlord tasks for a monthly fee.

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