Types Of Income Generating Investment Properties:
Real Estate Investments Can Take Many Forms.
A beginning investor may start out with residential properties such as a single family home or condo to rent to a tenant or with a duplex that they can live in one side and rent the other. This is a good way to get your ‘feet wet’ in the real estate investing market. Additional residential investment properties may include larger units (2-4 unit buildings) (4-8 unit buildings) , larger apartment buildings with many units and buildings in a complex. Mobile home parks are another option for investors.
There are a number of commercial real estate investment opportunities. Office buildings/units are one of the most profitable investments to own. Medical office buildings are one type and a general office building would be another. They tend to have longer term leases and there is not as much required to manage them.
Retail buildings are a great investment and can vary in types. These can range from stand alone buildings such as a restaurant, grocery or retail store to strip mall type properties with multiple tenants.
Industrial properties have a variety of uses ranging from warehouses and manufacturing to research and development facilities.
Rehabbing Houses For Profit – “Flipping”
When an investor purchases a home that has deferred maintenance or needs repair, they can purchase for a lower price, do the needed work on the home then sell it for a profit. This is commonly known as “flipping.” If the investor is savvy and has a good crew working for them they can complete the work needing done and get it sold in a timely manner. The more skilled you are at the process of seeing the true value and needs of the property the more likelihood of successful and profitable flipping.
There are a few ways to finance a property to flip for profit. The first, of course is cash. A cash purchase puts you ahead of the competition and sets you up for a quicker closing which in turn cuts your costs and time frames. Cash can be obtained by financing through a hard money lender or private source. You can also get the needed funds by taking out a second mortgage or home equity line on your own or a partners home or other properties. The second is a conventional loan. The tricky part of this is the fact that you can usually only qualify with a cosmetic fixer. If the property is badly in need of serious repair, a lender won’t typically loan on it. Thirdly there are also rehab loans but there are restrictions on selling the house within a certain time frame so it may best be used for owner occupied or properties that are planned to be held and rented for a certain time period.
In the past the FHA had instituted an ‘anti-flipping’ rule. This meant that no one using FHA financing was able to purchase a home that had flipped- more specifically been purchased previously within 90 days. This rule was suspended in 2010 and that has been extended to the end of 2012. This allows FHA buyers to purchase flipped homes as soon as they are completed, no waiting period. The reason for this rule suspension was to allow more buyers to purchase homes and assist in the economic recovery.