What Is a Short-Term Real Estate Investor?
The world of real estate investing can certainly seem like a vast one full of many distinct types of projects and opportunities. That can certainly be true, but by asking yourself the key question of what kind of investor you want to be, you can cut through a lot of that material and focus on the activity that you will not only benefit most from but will enjoy the most as well.
Asking yourself whether you are a short or long-term real estate investor will go a long way toward determining the types of projects you should spend your time pursuing and the kind of information you should be soaking up from as many sources as possible. For those that answer the question as short term, your primary purpose is to buy low and sell high, no matter how you get there. There are two main ways.
Put a Home through Rehab
The most common way to take a low-sale price home and convert it into a higher-sale-price home is through renovations on the property that add real value to the piece of real estate. You have no doubt heard of flipping homes or renovating homes and this is where those types of investors put their resources.
The draw for this type of investment just like any short-term investment is the prospect of a quick payoff. Indeed that can be the case but those pondering a pursuit of fixer-upper properties should keep in mind that it takes time and experience to get through a real estate transaction efficiently and first-time real estate investors can be overwhelmed by the renovation experience.
The key goal here is to find properties that have the potential to sell for far more than their renovations might cost. That search is being done right now by hundreds of real estate investors in your area, so pinpointing the best opportunities can often be a difficult, competitive pursuit. It may be a good idea to partner up with a seasoned investor on a few transactions before setting out on your own to get the hang of renovations and the homes that are best suited for that kind of investment.
Find a Gem
Many real estate investors skip the renovation portion of the process altogether and focus on properties that are undervalued on the market and could be resold almost immediately at a higher price. Obviously, these properties can be more difficult to find and the risk involved is usually higher because undervalued homes are usually undervalued for a reason.
One demographic that finds this type of investment particularly attractive is made up of committed real estate investors that also have a license to buy and sell real estate. One of the key barriers to reselling a home is the expense entailed in real estate commissions on both the purchase and sale of the property. For those that act as their own realtor, that cost goes away and the prospect of a profit increases greatly.
Short-term investments can certainly provide many benefits such as quick profits and the flexibility to quickly pursue other opportunities, but there will always be risks involved as well. If you want to get involved in renovating homes, make sure you do your homework and learn what to look for in a real estate candidate.
If hunting down undervalued homes is what you plan to do, think about pursuing a real estate license as well to cut down on the cost involved in the process. No matter what course you ultimately take, the key piece of advice is to become knowledgeable in the field before ever taking your first step. Real estate investors with the best foundation of understanding are more likely to build upon that and forge successful real estate investing careers.
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