Real Estate Investing Niche
As a novice real estate investor you will bombarded with all sorts of real estate investing techniques, as well as choices on the just what type of real estate investing you will be doing. For novice investors, I recommend you focus on the most simple techniques and invest in low-end fixer-uppers. Why simple techniques and low-end fixer uppers?
I am not an advocate of fancy no-down payment techniques, land trusts, sub, lease options or any technique that requires the seller to think too much. If the seller has to rack their brains to figure out just what it is you are trying to do chances are they’ll walk away. No, that doesn’t mean you can’t be creative, it just means you have to keep it simple. Keep it down to the lowest common denominator so the seller can easily and quickly digest your offer and make a decision.
Mr. Seller, I will pay you $3000 now, and ask that you seller finance the remainder at $450 per month for 48 month with a balloon payment at the end of 4 years.
Simple offers yield better results. Learn quickly how to formulate simple offers that will get accepted more often.
I ecommend fixer-uppers and rundown properties as a niche. Look for houses that have an “ARV†after repair value, of $100K or less.. This should be your bread and butter demographics. There are more buyers who can afford to buy a $100K or lower house than there are buyers for more expensive houses.
In the beginning stay in this range, there are more houses to choose from and a bigger pool of buyers to sell to. Do your research and find the neighborhoods in your area that have houses in this price range. Typically these neighborhoods are older, 30-40 years old, are undergoing positive change, are close to good schools, hospitals, commerce and highways.
This is your niche, this is where you want to specialize to succeed in the early stages of your real estate investing career.
Regards.
For my investment I bought a small condo that was somewhat beat up. Many people who take this route, and buy property that is fixable, for a cheap price, can get a substantial discount off the final price. Or, if you and the seller decide that you will fix it up and incorporate it into the final price, that still works out. I bought my piece of property at about 10-20K cheaper than other pieces in the same area. Buyers be forewarned, this is a somewhat time-consuming responsibility – about a month working on it full time – which could get put off for months and months. If proper care is taken, a decent amount of money can be made. All this is based on, however, if one gets the mortgage for the property!
Alex, you make some very good points. Most novices don’t realize it takes time and effort, but the savings can be substantial.
Regards
Another option that people may like is buying pre-constructed houses. These types of purchases take a long time to be fully complete because, in essence, what you are doing is buying a lot of land which a construction company is building a house on. Also, there is a certain degree of customization which you can have, i.e. telling them you want wood floors, tile, the works, etc.
Alexander, if you can get these homes at a price that allows you to make a very good profit then it’s good. I have seen where builder start a “spec” home and than move on to a new development or simple run out of money. Often times, depending on the local market, you can get them at a good price.