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A Real Estate Investment Guide For Your Success: The Long and Short of It

Aug 17, 2007
For most people, joining the real estate investment world is basically a dream. They consider investing in real estate to be an opportunity for a better future. Knowing that if done correctly, real estate investing can be profitable, the individual craves the life that a successful venture in real estate can bring.

In order to be successful, however, you need to understand the different types of real estate investing. The following information is a very basic real estate investment guide for long-term and short-term investments.

When you decide to invest in real estate, one of the first things you will need to do is decide whether or not you are investing to get cash immediately or to get cash later. Do you want to purchase a property and rent it out to get a monthly income or would you rather purchase a property and fix it up and resell quickly to get your profit immediately?

A short-term investment is when you want to get your profit from the property as soon as possible. There are a couple of different methods you can use. This real estate investment guide to short and long-term investments will just touch on these briefly but you should come away with a better understanding of what you want from your investment.

One of the ways to invest short-term is to purchase a property at a low-cost and then sell immediately at a low, but higher-cost. For example, if there is a home on the market that is listed for $90,000 but has a current market value of $115,000, you can purchase at $90,000 and sell it quickly for $110,000. You will need to subtract all the expenses for purchasing and selling in order to figure out your potential profit.

If it cost you $5,000 in closing costs and it will cost another $5,500 to sell your property through a real estate agent, you've deducted $10,500 from the $110,000. This leaves you with a profit of approximately $9,500.

If the whole process between the purchase of the property and the resale of the property took you three months, you've made this money within a three month period. This process is known as flipping properties and many often flip houses in a time period of much less than three months. This is quick money and what is considered a short-term investment.

Another type of short-term investing is to purchase a property and repair and renovate to sell at a later date for a much higher price. For example, if you were to purchase a fixer-upper at $80,000 and invest approximately $40,000 in renovations, you may find yourself able to sell that same property for as much as $160,000 or more, depending upon the appreciation and what the current market trends are.

Deduct all of your expenses and you could find yourself with a profit of $25,000 or more in a four to six-month period or less. Again, this gives you cash quickly and if you were to purchase three or four properties a year, you could end up with well-over $100,000 or more in profits annually.

Long-term investments involve rentals. These give you monthly income from the rents you will collect. Many find this is area they wish to pursue as it generally does not require one to invest any money into the property beyond the closing costs. Before you purchase rental properties, however, make sure you determine whether or not it is a solid investment by researching the rental history of the property and all the expenses associated with it.

As stated above, this is simply a quick real estate investment guide on short and long-term investments. Do your research and decide which type of investing will be more suitable to your life.
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