Find ‘Em, Fund ‘Em, Flip ‘Em

The Foreclosure Properties Strategy

Here’s an outline of a simple strategy for anyone interested in real estate – first time investors; first-time home buyers; experienced investors; and people who want to work in the industry.

Basically, there are three parts to the strategy.

  1. Find ‘Em – A property in a particular niche
  2. Fund ‘Em – How you will fund the purchase
  3. Flip ‘Em – Flipping/Selling to cash out and collect profits

Plus Variations….

For a First Time Home Buyer, number 3 in the strategy can be changed to “Fix ‘Em and Hold” because the goal is home ownership. And an experienced investor who is building a property portfolio can change number 3 to “Fix ‘Em and Hold”.

Let's look at how the different parts come together.

Find ‘Em – Your Real Estate Niche

Recommended niches for beginner investors revolve around the home rental market because it’s relatively easy to become knowledgeable about properties within this market. The various housing niches you can concentrate on include single family homes, small apartments, foreclosures/distressed properties, condos, duplexes/triplexes/quadplexes, and mobile homes.

Other niches such as storage units, commercial property, land, and student accommodation require different skill sets.

Choose a niche that interests you as an investor. Plus, your skill-set or expertise needs to be taken into consideration. For example, if you have a building trade, or you’re handy with hammer and saw, you might want to add “Fix ‘Em” to the strategy to engage rehabbing skills. Finally, there should be an obvious need in the marketplace for the type of real estate being targeted. The rental homes market fits that requirement due to its size and the constant demand generated by first home buyers and investors.

If I had to begin my real estate investing all over again, I’d choose Foreclosure Property as my niche. These properties are invariably cheaper to buy; they often require some rehabbing (this adds value using my skills); they can quickly be flipped for immediate profits; or else added to my portfolio. Another factor in favor of the foreclosures is how easy it is to find funding for the many deals you’ll come across. More on funding shortly.

Lastly, there are many people who want to work in the real estate industry by flipping and/or wholesaling properties. Foreclosures can fit in with that business model perfectly. 

If you are new to property investment, find a niche and then stick with it until you become an expert in it. Don’t keep looking at other niches, thinking they might be easier or more profitable – better to become a master of the one you’re in.

Fund ‘Em – Financing The Deal

Funding deals is what most people find the hardest about real estate investing. If you’re broke, who will give you the finance to purchase a house or unit? Not the banks. Even people with a job and a deposit can be refused a loan by banks or financial institutions. However, there are numerous ways to secure finance if you work at it by asking around, talking to the right people, searching online, approaching friends or relatives, joining investor groups and the like.

Funding sources

Private Money Lender – An individual, professional or company willing to lend funds for buying property. Ask family members, friends, accountants, lawyers, other investors, networking clubs or members of investment clubs.

Hard Money Lender – Short term loans at high interest rates secured by property. Find through online searches, CPA’s and attorneys, other investors.

Partnerships – Form a working partnership with someone who wants a return on investment. They supply the money for the project while you supply the expertise. Look for them amongst relatives, friends, other investors.

Other Investors – Approach an investor you know or one you meet through an investment club and present them with a deal. Finance might happen if the deal is strong or simply because they like and trust you.

Seller Financing – When you find a deal, don’t be afraid to ask if the seller will ‘fund’ the purchase by agreeing to receive payment in monthly installments for a number of years.

Rent To Buy – A contract where you agree to lease and live in a house for a specific period until you secure a mortgage to pay out the purchase amount, enabling you to gain ownership.

Self-Directed IRA’s and 401(k) – If you have one of these accounts, you can withdraw funds or get a loan for the purpose of buying real estate. But seek professional advice to do this as the rules can be quite complex.

Funding from Real Estate Guru’s – For those who want to begin part time and turn it into their job or career in the real estate industry, there are numerous ‘gurus’ who will teach you their strategies and, importantly, allow access to funding arrangements they have for deals you find. Buying and flipping houses is an example of what some teach though there are other strategies taught as well. Guru’s include Cameron Dunlap, Lee Arnold, Ron Legrand  and Lance Edwards.

Flip ‘Em – Offloading Your Property

Now it’s time to cash in and collect your profits. Depending on your strategy and your objectives, this usually means selling the property, or flipping it for a fee to another investor. Then you can start again by finding another deal.

Alternatively, you might not want to sell, which brings us to…..

Fix ‘Em and Hold ‘Em – There are a number of reasons why you might not want to sell the property. One is that you are a first-time home buyer which means you won’t be selling your home. Another is, as an investor, you are adding to your portfolio. You’ll want the property in good condition so a rehab (Fix ‘Em) might be required.

There you have it – the broad outline of a strategy used by many real estate investors that’s easy to tweak it to suit your particular situation. If followed correctly, you’ll land your first property investment, or secure your first home.

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