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More Strategies For Real Estate Investments!

With the recent subprime mortgage crisis, real estate investments may not be the first place you would think to put your investment dollars. That could be a mistake.

Let's pause for a moment and reflect on the "bursting housing bubble". The mortgage and credit crisis has been caused by a large number of home owners unable to pay the mortgage as their home value declined. This occurred due to historically low interest rates, lax lending standards, and a speculative fever. Simplified, people with less than stellar credit bought real estate investments at over-inflated prices.

Considering the historical returns, and the fact that this bursting bubble is generally limited to specific markets, there are several ways to still profit from real estate investing.

Flipping Houses

"Flipping houses" is the practice of buying property, then selling for ... hopefully ... a quick profit. The flip side to flipping houses is keeping property for the long term in order to take advantage of tax incentives and capital appreciation. Calculate the total costs vs amount saved from the tax write off. Be sure to include interest charges, property taxes, insurance, repairs, etc., along with the regular monthly mortgage or loan payment.

Apart from the gains from tax write offs and appreciation, some costs can be offset by renting the property. However, consider the amount of time and cash you have to: find tenants, manage the property, and pay for or make repairs.

Foreclosures

Foreclosures are another investment strategy, but not without risk and often requiring a substantial cash outlay. A foreclosure occurs when a property owner is no longer able to make payments on a mortgage, over a period of several months, (usually more than 3 months). However, seldom are foreclosed properties all gain and no pain.

Foreclosure properties tend to be in need of repair. There is no incentive for someone about to lose their home, to maintain it in pristine condition, so be prepared to spend time, money and effort bringing the home back to salable condition. If you have the skills, great. Otherwise, devote the time, and effort to find a reliable contractor.

Abandoned Properties

Similar considerations apply to investing in abandoned properties, but with some possible additional legal hoops to jump through. Foreclosed properties usually have clear title. The lender (a bank, mortgage company, or other financier) reclaims title in the foreclosure process. However, with abandoned properties, it may not be clear who has title. Be sure to factor in the additional time and cost for title searches and possible legal action.

Real Estate Investments: REITs etc..

For those wanting to take advantage of the profit potential in real estate, but without actually laying out cash, signing dozens of documents, or worrying about the property itself, there are pure paper investments. As a result of computer technology and the massive expansion of investment options in the 1980s, several types of property investments came into existence. REITs (Real Estate Investment Trusts) are one type. There are others: