Producing Cashflow With Real Estate Investment Properties

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					Producing cashflow is one of the primary reasons people invest in real
estate. In order to maximize profits and minimize expenses, investors
need to analyze all scenarios that can occur. These include property
prices, rental income, or profits produced from selling the realty.

Finding real estate that produces cashflow can be challenging; especially
in today's tumultuous market. Although there are plenty of discounted
properties there is much more to real estate investing than buying houses
below market value.

Investors often seek out short sale and bank owned houses because
distressed properties are priced lower than homes listed by private
sellers. Furthermore, bank owned foreclosures sometimes qualify for
grants such as those offered through HUDs Neighborhood Stabilization
Program.

Although investing in distressed real estate can be a profitable
strategy, investors have to carefully weigh the pros and cons. First and
foremost, a vast majority of bank owned homes require repairs and
renovations. Investors will need to conduct due diligence and acquire
estimates for repairs to determine an accurate cost of the property.

Another consideration is figuring out how long it will take to return the
home to livable condition. If it takes several months to restore the
property, investors will lose out on cashflow that could have been
acquired from renting or selling the house.

Investors should also calculate which strategies will produce the highest
amount of cashflow. Investment properties can be sold, rented, or traded
using 1031 exchanges. Making use of 1031 exchanges is a preferred method
for reducing capital gains tax. However, these kinds of transactions
require hiring a Qualified Intermediary to oversee the transaction and
handle finances associated with it.

Although selling houses isn't as easy as it used to be, there are plenty
of people ready and willing to buy a house. Investors can list their
properties through realtors or as for sale by owner. They can offer owner
will carry financing or enter into lease purchase agreements.

Using creative financing strategies can produce greater amounts of
cashflow as long as the deal is constructed properly. People that need
owner financing usually have bad credit that prevents them from obtaining
a bank loan. Therefore, investors need to investigate buyers and validate
they can meet financial obligations.

Seller financing is in high demand due to the number of foreclosed
homeowners. Once a person has the black mark of foreclosure on credit
reports they won't qualify for bank financing for several years. Private
financing can bridge the gap and allow them to buy a house while
repairing their credit.

Investors normally don't carry the full amount of the sale price. On
average, investors cover half the amount and require buyers to pay the
balance with cash. When buyers obtain bank financing for the balance the
bank becomes the first lien holder and investors have the second mortgage
lien. This can place investors at risk if buyers default on either loan.

Lease purchase option agreements are a good choice for investors that
aren't comfortable providing financing. People that enter into rent-to-
own contracts tend to make excellent tenants. Not only do they pay rent
on time, they also take better care of the property. There is also less
chance of them skipping out without providing notification.

Both strategies provide opportunity to produce cashflow immediately
because buyers provide a down payment to secure the property. Oftentimes,
investors can retain down payment funds if buyers default on the
agreement.

It's always best to work with a real estate attorney when entering into
lease purchase or seller financing contracts. The process for these
methods differs by state so it's important to have contracts reviewed by
lawyers.

These are a few ways for investors to profit with real estate
investments. Although the market appears bleak there are still plenty of
opportunities to make money with realty. Those who take time to learn how
to capitalize on market trends can build a strong portfolio that provides
consistent cashflow for years to come.

				
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posted:4/30/2012
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