The RIGHT way and the WRONG way to invest in real estate? If only. Wouldn’t it be great if we could all learn the “right” way or even the “best” way to invest?
We’ve been investing full time since 2005 and have done hundreds of deals every way you can think of from wholesaling to retail flipping, assigning, selling with lease option and holding rentals. I can assure you there is no “right” “wrong” or even “best” way to invest in real estate.
Why? Because, it depends.
It depends upon:
- your goals
- your location
- the property
- the buyer
- and probably most of all, the economy
2005 was a great time to renovate and sell retail. Why was it a great time to flip? Because it was easy to sell. For those of you who weren’t in the business then, know that all you needed in 2005 to be approved for a mortgage was a pulse. And what were houses appraising for? Anything you needed them to. Simply tell your appraiser what your buyer needed the house to appraise for and, like magic, that’s what the appraisal would turn out to be, sometimes to the dollar.
Fast forward to today and we wonder where those mortgage lenders – and appraisers – have gone. If you’ve tried to sell a property in the past year, you know that it can be tough for buyers to get a loan and it’s also an effort to get the property to appraise for as much as needed. Lenders have tightened their borrowing requirements and appraisers are under a great deal more scrutiny since the 2008 mortgage meltdown. Not that either of those is a bad thing, it’s just the reality we work with today.
And that reality is in constant flux. Selling, and therefore flipping, is actually much easier again than it was recently for a number of reasons:
- lenders seem to be lending again
- meaning buyers are back in the market looking for deals while prices and interest rates are low
- causing the real estate market to stabilize somewhat leading to increased house values
The ebb and flow of real estate.
So, the “best” way to invest in real estate is not necessarily the same year after year. When lending and values are strong, SELL! Flip, wholesale, retail – unload the dogs from your portfolio.
For the reverse economy, when lending froze and the economy depressed, we were thankful to be holding rental properties as we had more tenant applications than vacancies. Previous homeowners were losing their homes (for a variety of reasons) and needed to downsize or simply to rent because they no longer qualified for loans. Back when lenders were giving loans without even requiring the borrower to qualify (no doc loans), it was hard to find a tenant.
The moral of this story: it’s always a great time to be in real estate, however, there is no “right” way or “wrong” way to invest. There are certainly “better” ways depending upon the circumstances including those discussed above, but don’t wait until you’ve figured out the “right” way to invest or you’ll miss a ton of opportunity!