With the U.S. housing market trending back in a positive direction, many entrepreneurs and businesses are investing in real estate. According to some statistics, roughly 1 in 3 homes sales are investments. If you're thinking about the possibility of investing in real estate, here are some of the most commonly asked questions by real estate investors.
Commonly Asked Questions by Real Estate Investors
Is it Better to Flip or Rent Investment Property?
To rent or flip -- the age-old question asked by real estate investors. As you may already know, "flipping" a home involves buying it, repairing/upgrading it, then reselling it for a profit. When done correctly, it can be a highly lucrative business model for real estate investors.
Renting, on the other hand, means you buy the property and rent it out to a tenant or tenants. Both flipping and renting require some additional work in terms of preparing the property. You'll typically spend more money and time when flipping a home initially, though renting requires a greater investment of time and money in the long term.
Do I Need a Legal Structure?
It's recommended that you consult with a professional CPA to learn more about the nuances of legal structures, but there's no requirement for having a legal structure; you can make real estate investments under your personal name as a sole proprietorship. Many investors prefer to use a LLC or S-Corp for various tax and asset protection benefits.
What is ARV?
When seeking investment property, you may come across the term "ARV." This is an acronym for "After Repair Value," which is used to determine if a property is worth investing in. Many factors go into a property's ARV, including the sale price of the property, repaired noted during the home inspection, and the estimated cost of fixing those repairs. A good rule of thumb is to only invest in properties with an ARV that's 10% or higher than the property's sale price and repairs.
How do I Market My Investment Properties?
You can't expect to buy and sell (or rent) a home for profit without a clear marketing strategy. Many investors prefer direct mail to reach prospective buyers, as it allows for rich messages while targeting specific regions and demographic. Creating listings online is another way to market your property. You can also seek the assistance of a professional real estate company to sell or rent your investment property.
How to I Obtain Funding for My Real Estate Purchases?
There are many funding options available for real estate investors. This includes traditional loans from a banks, as well as private loans, hard money loans, and even wholesaling. Alternatively, you can fund your own real estate purchases using revenue earned from past investments.
This article was brought to you by Premier Island Properties - A full service real estate firm serving Hilton Head Island and Bluffton, South Carolina. For more real estate news, information, and interesting facts about the Lowcountry, please visit our website.
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