Short Term or Long Term Real Estate Investing: Which is Best in 2013?
Short Term or Long Term Real Estate Investing: Which is best in 2013? Well that depends on your real estate investing goals, your real estate investing experience, your real estate investing interests, and your cash reserve available for investing.
If your cash reserve is limited (less than $20,000), then I don’t recommend pursuing a buy and hold (rental property) strategy. At least not in the beginning of your real estate investing career. Though I would urge you to invest 25% – 50% of your short term real estate investing profits (wholesaling,) into a cash reserve for long term real estate investing later.
Short Term Real Estate Investing: (Wholesaling Real Estate / Flipping Real Estate )
The benefit of Wholesaling or Flipping Real Estate, is that you can increase your cash reserve / net worth exponentially, and rapidly.
For example let’s say when I start out in real estate investing my cash reserve was $2,000.
If I could wholesale or flip 1 property every 90 days, and continue to work at my job. I should make a minimum of $20,000 in profit, and hopefully more in my first year. As $5,000 is the minimum profit, I’d accept on a wholesale deal. But certainly wholesalers will earn much more if they find the right real estate deals! Which is why I don’t recommend getting emotionally attached to a property. This is a numbers game, if the numbers don’t work for a particular property, don’t accept a smaller profit (less than $5,000), move on, find a better deal. There are plenty of opportunities out there!
But back to my example. So if at the end of that year, I do just 4 deals, earning a minimum of $5,000 each, I’ll have earned a $20,000 profit. Now if you follow my advice and add 50% of that to your cash reserve, for long term real estate investing, you’ll have at least $12,000 in your cash reserve. Which is at least 6x what you had before you started investing in real estate. I think these numbers are very conservative. As I have always earned much more than $5,000 on my wholesale deals.
Once your cash reserve reaches at least $20,000, and you have a good understanding of the market, the neighborhoods, real estate values, and rehab/property management costs. Then you are ready to add Long Term real estate investing ( buy and hold ) to your real estate strategy.
Keep in mind when wholesaling, you should start out flipping distressed properties “as is” utilizing transactional funding or private money. Don’t try to wholesale properties with your own funds, even if you have the cash. Using other peoples money (OPM,) allows you to do more deals, with less risk. My company, The REI Lab, offers transactional funding to our coaching students, for up to 360 days, and we will fund 100% of the purchase price, including your closing costs. Which means you should have no out of pocket expenses! Points are as low as 2%, with a $495 document processing fee. The best part is, you don’t have to make any payments on the property if you close (sell it) within the first 90 days!
Long Term Real Estate Investing: (Buy & Hold Real Estate/Rental Property)
Long Term Real Estate Investing is truly the best way to become financially independent and build wealth with passive income. Just be sure you are ready financially, as I said earlier you should have at least $20,000 in a cash reserve, before buying any rental property. Also you need disposable income to pay all of the expenses on the property, with, or without a renter.
Don’t “buy” yourself a job! The best thing every real estate investor can do is stay focused on doing more deals, and making more money. Long term real estate investing is supposed to provide wealth with passive income. If you think you are going to save $300 painting an apartment, or playing handyman you are wrong. There is only so much time in a day. Let’s just say it takes 24 hours of your time to research, inspect, fund, and close on a new rental property. If you spend that 24 hours instead playing handyman, when many handymen only make $10 – $15 per hour. How much money did you really save? At most $360? When you could have closed on a new property that earned you that much or more every month, for the rest of your life and in the same amount of time! Work smart, not hard. Don’t limit your potential. Think big, set goals, and achieve them! Spend more time with your family, and friends. Like I said, don’t “buy” yourself another job!
Written By: Laura Al-Amery A Real Estate Coach & Mentor
Want to increase your rental property net income (profit) by 25%, & pay your mortgage off 6 years early (or more)? Then check out my article on: rental property income.
Thanks for reading my article on Short Term or Long Term Real Estate Investing: Which is best in 2013? If you enjoyed it please stop by and Like my Facebook Page