Cash Is King in Today’s Real Estate, But Have an Exit Strategy

For cash buyers in today’s real estate market, the power to offer cash funding and a quick close can translate into a better purchase price. Motivated sellers can include banks that have many properties to sell, individuals who need to move and have been unsuccessful in selling for some time, and homeowners in financial distress. While it always feels great to know you got a good price for your home or investment, in today’s market the smart cash buyer will also have an exit strategy before tying up his cash.
Two common real estate investment strategies Gary Vee How To Get Real Estate Clients are: 1. Flip and 2. Buy and Hold.
“Flipping” a property refers to purchasing a property below market value, repairing and renovating it appropriately, and then selling as quickly as possible. An investor’s ability to flip a property depends on timing and keeping costs down, including original purchase price. Some people make good incomes flipping property. However, it is possible that one or more properties purchased to “flip” will not sell, or will not sell in a timely manner. The best way to minimize risk in this scenario is to purchase investment properties only when a realistic market rent will cover your costs, as well as cover a mortgage should you be forced into a long hold. This way, you can recover 60 – 90% of your cash by taking a mortgage on the property, and let rents will cover expenses until the market recovers and you can more easily sell.
Historically, the California market has lofty peaks and deep valleys with an approximately 12 -18 year cycle from one peak to the next. The peak in 1989 was followed by a low around 1994. The next upward climb started gaining momentum around 1998 – 2000, but did not peak until 2006, 18 years from the previous. If the peak was in 2006 and we are close to the bottom in real estate now, there is a long, slow climb ahead before prices heat up once more.
To “Buy and Hold” may be the most common real estate investment strategy. Values go up over time, sometimes with a dip in between peaks. A common error many real estate buyers made during the early 2000’s was buying for appreciation instead of cash flow. When a market is appreciating quickly, it is hard to match the cash on cash return for doing nothing but holding title on a property. However, without an ability to rent that property for at least break even cash flow, the buyer has made a bet on appreciation with a huge risk of carrying heavy costs if the market or events do not go as planned.
Whether in 2011 we are at the bottom of the real estate price fall for this cycle or close to it, real estate purchases made well in the next 2 – 5 years will set investors First Time Home Buyer Guide Pdf up for exciting returns over the following decade. If you buy for cash flow when the market is down and people are eager to sell, your investments will serve you well.

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