How does Real Estate Investing Work?

How does Real Estate Investing Work?

Real estate investing will work the way that you want it to work.  It is dependent on the goal that you wish to achieve.  Are you looking to build lasting wealth or just wanting to make quick cash?  Do you desire a long-term strategy or a short-term harvest?

Rent and Lease Option

The question in your mind might be: how does real estate investing work in building wealth?  The answer is found in your investment strategies.  When you buy and hold property to rent or lease to a tenant together with an option to buy, this scenario can be considered as a long-term investment.

Rent option involves finding a specific property, making its condition ready for rent, and then marketing it to possible tenants.  This investing strategy offers plenty of profit opportunities.  When the monthly rental given to you is more than the mortgage and other necessary expenses, you can create cash flow.  Wealth will be built through tax advantages, tenants paying down your mortgage, and property appreciation.

At the same time, lease options can be created by leasing the property for 12 months or more, also with an option to buy.  Income from lease options includes tax advantages, profit from sale (when the “buy” option is exercised), monthly cash flow, and upfront option fee income.

Wholesale and Retail Quick Turn

Now, if you want to find out how does real estate investing work in making quick cash, you need to study short-term investment strategies.  This includes flipping or quick turning property, which means buying and selling it right away.  This can generate big and fast cash if you will buy the right properties.

“To practice this principle, you must acquire knowledge both in repair costs and market values,” says Tom Dunn, a real estate investor.  Typically, the property will be contracted at low cost and then marketed higher so that the new price includes a profit.  Deals such as this can easily make you from $2K – $30K depending upon the type – whether wholesale or retail.

When you talk about wholesale quick turns, it involves finding deals below market value and then selling them at wholesale price.  Your buyer will be another investor who needs to create profit too.  You make good money by negotiating the deal upfront and turning it around quickly.  Retail quick turns work pretty much the same, except that homeowners (not other investors) are your target buyers.

So how does real estate investing work? According to Nancy Spivey, real estate investing expert, “Determine your strategy – short-term, long-term, or combination, to make it work.”

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