Investors

Your typical “buy and hold” strategy. Buying a multifamily, multiunit, or apartment building and renting those units out to collect passive income is a great way to build cash flow and wealth for the future.

The Pros

• You can buy a multifamily home, live in one unit and have the tenant’s rent cover your mortgage and expenses. Using a FHA loan is a great way to get your foot into a multifamily home without breaking the bank. Essentially – you live for free.
• Build up passive income from your rental portfolio to allow a great stream of passive income to come straight to your inbox. Mailbox Money!
• If you eventually do decide to sell, you would be cashing out on top of the passive cashflow that was being received over the years. That’s what I call the “jab, jab, jab, right hook” method to investing in real estate.

The Cons

• Think what you have what it takes to be a landlord ? You’ll need to cope with the noises and smells of your tenant(s).
• Repairs, renovations, potential evictions – be sure to know what you are getting yourself into
• More of a marathon approach to investing vs. sprint (like flipping)

I’m pretty sure you’ve watched the HGTV shows. You know – the ones where they buy a distressed home, fix it up, and sell it for huge profits that would make anyone quit their job immediately. Sad to say, it’s TV. Although flipping is definitely a great investment strategy, be sure to know of the pros and cons.

The Pros

• Straight CASH!! Lump sums are usually gained when flipping. No need to depend on monthly cash flow to add up. Collect all of your profit when the house sells.
• Only a few flips a year will earn you a very nice income. Don’t be surprised to hear about an investor buying a distressed home for $400k renovating it for $100k, and then selling it for $650k – profiting $150k.
• Provides you with time and freedom to work on multiple projects at the same time.

The Cons

• HGTV is a dramatized version of house flipping. Sorry to be the bearer of bad news. Flipping homes is definitely not as easy as the HGTV shows make them seem. It takes hard work locating the best deals, getting your rehab team together along with other important players to pull off the transaction.
• The same way you can profit $150k in a single flip, you can also lose money as well. Underestimate your renovation expenses, construction timing, or final selling price and it can turn into the Flip from Hell … real quick.

These types of properties are usually a hybrid of Residential and Commercial real estate. You’ve probably noticed them. They usually have storefronts on the bottom and an apartment complex on top. These are sought out by investors looking to earn a favorable return on their investment. These projects usually require a much more complex financing strategy and the supply of these opportunities are usually limited depending on what market you’re in.

These can be especially beneficial in markets near transportation, shops, restaurants, and colleges/universities. With the ever need for housing, obtaining a worthy tenant can be a pretty smooth process.

The Pros

• A good investment condo can bring you favorable cash flow and appreciation over time. Another way to build wealth and passive income.
• Less overall maintenance than dealing with a home or multifamily home.
• The omnipresent need to rent can potentially cause your investment condo to always have a tenant present

The Cons

• Since most condo’s are not FHA approved (that will change soon), an investor would not be able to take advantage of a low down payment option that FHA offers and be forced to obtain a conventional mortgage which could request nothing less than 20% down.
• A long term strategy – don’t expect to enjoy the fruits of your labor in the next week or year.
• Very high condo association fees or changes to the association fees can dig into your cash flow profit. Be sure to analyze your budget correctly.
• Be careful of special assessments. Special assessments are fees that are charged to the condo owners of the complex in order to finance major repairs and renovations that the complex may be experiencing. For example, if the condo complex is in the process of repairing the roof of the entire complex, they may charge an assessment of say $200 for the next 3 months to all the residents of the complex in order to finance the project.