Profiting From Residential Real Estate

Oct 3

08:07

2011

Luis Roque

If you want to make money from residential real estate, you need to follow a couple steps. First, define your exit strategy before you buy a property. Second, price your property correctly. Failing to do either greatly diminishes your chances of success.

There are two reasons why a property doesn’t sell. Number one, the property is not priced right, and number two, the property is not priced right. That’s really all there is to it. If you’re interested in making money from residential real estate investing, you need to keep in mind that someone will always buy your property -- provided that it is priced correctly.

Therefore, it’s important to understand what your exit strategy is before going into a deal. There are different criteria for rehabbing a property or wholesaling a property, and you need to know what they are.

For example, if you wholesale property and you buy a property that is 75 cents on the dollar of the true market value and you’re trying to wholesale it, chances are that if the other wholesalers in your area are buying properties at 70 cents on the dollar, you are not going to be able to sell your property. What good is it for me to buy a property at 40 cents on the dollar if tomorrow I’m not able to exit it?

If you’re actually paying for the property and not just flipping the contract, the issue becomes more complicated. You have to be able to make a decision to take a loss today versus taking that same loss 60 days from now. Taking the same loss two or three months down the road will ultimately cost you more anyway, as you will be paying to service the note for those months.

The same is true if you have an expected rate of return in mind, but you find that you have to settle for less than you had hoped. It makes more sense to make 5% on your money today than to take 5% stretched out over 90 days. Remember: you’re in residential real estate to make money, so a little today is better than a payday that may never materialize.

At HIS Real Estate, our goal when we’re flipping properties is to be able to turn our and our investors’ money over and over and over within a given cycle. If that given cycle is 90 days, we just want to keep turning our money over and over and over. The quicker we get into and out of a deal, the better.

So define your business plan, define your criteria, and figure out how you’re going to exit your properties before you even have them. Doing so will help you have a successful career in residential real estate investing.

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