We have advocated the use of a defined investment strategy complimented by multi-tiered research as the most effective way to profit in the real estate investment business. We do believe that these steps protect the investor and provide the best rate of return on investment.
While we recommend either the buy-the-bargain strategy, the increase-the-value-strategy or the double-digit capitalization rate strategy, there are other strategies that have worked. The most popular of these strategies, we call the pot-luck plan. The pot-luck investment occurs when the buyer believes the property will soon appreciate in value.
Hey, pot-luck has worked, we do not question that. But, the pot-luck plan fails more often than it succeeds. This is a highly speculative purchase and an amateurish approach to real estate investment. It is no easy task to determine which areas will appreciate and an even riskier task to figure out which properties might appreciate in time. Then again, the investor must calculate how long before the appreciation takes place and must have a plan to carry the property until that time. Good luck! This type strategy sounds more like a dice game.
In today’s market, there are many opportunities to succeed. There are also plenty of challenges and very little opportunity for a quick fix. There are really only two time frames for investors to consider.
Flipping – The investor who turns the property over in a very short time is flipping the property. In bull markets, this strategy was effective. In markets with high supply, flipping is a riskier proposition. The ultimate flipping success is to sell before you take title.
Long-term – This strategy is the most common in today’s real estate marketplace. The increase-the-value strategy and the double-digit capitalization strategy work well with the long-term investment. Holding for the long-term requires patience, discipline and a willingness to be a landlord.