Most real estate investors follow a couple of different methodologies.
These are the investors who believe in the Buy and Hold Strategy to build a rental portfolio model. This simply means they are in pursuit of cash flow and appreciation. Experts refer to this as the ‘patient’ strategy because it takes time to allow your money to grow whether investors use their personal cash or leverage financing to build their net worth. Of course, a key factor depends on the market, in other words, locations such as Nashville, Los Angeles, and San Francisco have very high acquisition points today. But if an investor bought in the years listed below, they may have doubled, tripled, or quadrupled in appreciation and today find themselves sitting in an amazing equity position.
Below are samples of cities in high appreciating areas during these time periods:
Nashville, TN 2008- 2012
Los Angeles, CA – 2007-2011
San Francisco, CA- 1999-2003
Cities that Cash Flow well Today
These are low entry acquisition points such as Midwest, Chicago, St. Louis, and Kansas City. These location points ranging from $40,000 to $80,000 which is unheard of around the country. Cleveland was ranked by CNBC as the #1 location for rental returns in the USA. So if you missed the opportunities in your city, you can still invest, if you’re willing to look out of state.
The Rehab Methodologies
These investors subscribe to fix & flip, get in, and cashout. The rehab concept allows an investor to turn over their money using cash, line of credit, equity line, or hard money funding to buy, sell and collect a profit at closing. The ultimate goal here is to earn X amount of dollars on each project over the course of a year. Some of the ways investors identify a property to acquire are Sheriff Sales, Tax Sales, Real Estate Agents, attorneys, and wholesalers just to name a few examples of sources for acquisition. It is getting increasingly more difficult to find the right deal in many markets due to the rising cost of real estate.
Because of the higher barriers of entry in the stronger markets, it has weeded out new investors, smaller investors are also known as ‘mom & pop shops, and undercapitalized investors desiring to become players in the marketplace. Some investors have had to move into collaborations, partnerships, and or relocate into affordable cities that allow them to get into the rehab games. By contrast, it may be easier to find more rentals in most markets than rehab.
Lastly, there are combination investors that do both the methodologies (rental and Rehab) as a way to have a balanced approach to real estate investing. There isn’t a right or wrong way to go with, both ways work. It is also the investor’s strategy that makes it a winning decision on their part. Our real estate investor resources help individuals, couples and partnerships create a blueprint for getting started. We can assist you in exploring markets for seasoned investors as well as new investors.