TWO APPROACHES TO CONSIDER WHEN YOU INVEST IN REAL ESTATE
Cheryl Braunschweiger
?Speaker | Trainer | Certified Guide | Mortgage Girlfriend | Market Production Sales Leader ?? I help audiences amplify their conversations so they always know Exactly What to Say? to achieve their desired results.
1 – BUY AND FLIP This strategy involves buying a house with the intention of selling it for a short term profit. Typically, investors who take this approach look for homes that need improvements and renovations. Here are three questions to ask yourself before you take the leap with this strategy: How much will the investment cost you? This includes all the costs of renovations as well as the “carry costs” of paying the property taxes, home insurance and maintenance on the property while you own it. What is a reasonable sales price? A real estate agent or appraiser should be able to give you an estimate of the future market value of the property assuming you make certain improvements. What will be your net proceeds from the sale? The formula for this is sales price minus real estate commissions, transfer taxes, mortgage payoff and seller’s closing costs. Don’t forget about the possibility of capital gains taxes if you sell the property at a profit.
2 – BUY AND HOLD This strategy involves buying a house with the intention of renting it out over time. Typically, investors who take this approach look for homes that can produce a positive cash flow over a certain holding period (typically 3-10 years). Here are three questions to ask yourself before you take the leap with this strategy: How will you find (and vet) a tenant, collect the rents and manage the property? You may want to consider finding a property management firm to help you with these items. What will be your positive (or negative) cash flow? The formula for this is gross rent minus property taxes, home insurance, maintenance costs, and mortgage payments. You should also count “vacancy loss” as an expense for budgeting purposes. Vacancy loss is calculated by multiplying the gross monthly rent by the percentage of time you think the property will be vacant. For example, a property you would rent for $2,000/month would have a “vacancy loss” expense of $200/month assuming a 10% vacancy rate. What’s your exit strategy? This involves thinking about your time frame for selling the house and your net proceeds from the future sale.
CONTACT ME FOR MORE INFORMATION! PLEASE NOTE: THIS LETTER AND OVERVIEW IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL, TAX, OR FINANCIAL ADVICE. PLEASE CONSULT WITH A QUALIFIED TAX, LEGAL OR INVESTMENT ADVISOR FOR SPECIFIC ADVICE PERTAINING TO YOUR SITUATION.
Source: CMPS Institute
Cheryl L Braunschweiger
VP Branch Manager Producing
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Nova Home Loans
17204807792
11080 Circle Point Rd, #100, Westminster,
Colorado 80020 Corporate
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