What is the first rule of real estate investing. Most real estate experts tell you “Leverage – Using Other People’s Money?.
Most real estate investors want 100% financing for a hand full of houses they intend to purchase or they request that the owner finance the property. The strategy is to buy and hold a handful of rental properties for a few years until the equity in the property has increased.
Then they either refinance all the properties or sell all the properties of take all the equity out and then retire rich with millions of dollars in equity or a healthy cash flow to sustain the lifestyle.
Within a thirty year period of time real estate market will have at least five downturns. The value of property in some areas can hit the bottom just as you decide to retire. The real estate investor of today does not want to wait thirty years to cash in and live the life.
Real estate investors diversifying their investment activities. Some are doing quick turn around transactions in addition to the long term buy and hold. If you are an investor. The theory of quick turn around transactions is finding distressed property get it under contract and sell it to another investor for a quick $5,000 – $15,000.
Some investors are doing short sales and pocketing more cash. Being house rich and cash poor can put many investors in a crunch if some crisis happens. Not having the money to close a good deal prevents some investors from cashing in on lucrative transactions. The first thing new investors need to understand is that lack of money should never be an issue when you plan.
Combine the buy and hold method with the quick-turn-around investment strategy to put cash in your pocket within a matter of weeks rather than years. If you find a good deal with lots of equity sitting in the property be sure you can re-finance within a short period of time to get the equity out and into another high yield interest investment fund that you can access when you find the next good deal.
Use ARMs with low start rates that give you 3 – 5 year before they reach their max. Refinance all your property with low start ARM?s and put the excess money in an account that builds your equity twice as fast. This financing alternative allows your tenant to make the full house payment while you pocketing Your money. No negative cash flow.
Set up lines of credit for your business. You may never need them but in case you do the money is sitting there waiting for you to use it to create more wealth. With a line of credit versus a loan, you only have to pay for the money you actually use.
To implement the strategies, you need to align yourself with as many funding sources that you can find. This strategy will insure that you can continue to add to your real estate empire or to maintain the empire that you have already built.
So, when you are building your real estate empire consider buy and hold strategies in addition to a quick turn-around transaction approach to investing. Build your funding sources so that you are ready to make the offer and close the deal.
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