What Kind of Investor Do You Want to Be When You Grow Up

What kind of real estate investor do you want to be?
If you want to invest in real estate, the first thing you have to do is figure out where your niche is. We are going to go over some of the terms and different avenues of real estate investing. Our group tends to focus more on the single family home as this is the quickest and easiest way to invest in real estate. There is also commercial and multi-family investments which are more involved and require significant more capital. There are several meetup groups that focus on these investments.

Term that comes up often is wholesale or flipping. Easiest way to explain wholesaling is that this is an investor that finds deals for people looking to flip a house. They find a property, security it and then offer it to investors that are looking to flip a house. They will mark that property up a few thousand dollars. Wholesale can be accomplished with significantly less capital than flipping a house. Wholesalers provide houses to flippers, so that flippers are not spending all their time searching for properties.

Flippers are investors who are looking to purchase a home and fix it up to either sell or rent. You have to decide as to what course of action will be undertaken prior to making your repairs. If you are renting you may look to use more durable treatments for tenants that will come and go. If you are going to sale, you make upgrades to match the homes in the area.

A flip can be either cosmetic where the home may only need a little paint, minor repairs and cleaning to put back on the market. The other end of the spectrum is a house that needs a complete rehab. This may include roof, foundation, kitchen and bathroom upgrades, new flooring and other things to get the property to the level of the properties in the area. The cosmetic will not have as big a return on your money as there is lower risk. The full rehab is riskier, but the returns can be a lot more "if" the project goes as planned.

Once a property is completed, there are three options. The first is to just sell the property and move onto the next project. The second is to hold the property and become a landlord. Certainly not for everybody, but it does generate a stream of income. The third way is to utilize the tax laws and generate tax free income. If you purchase a home, live in it two out of the last five years, the house may be sold tax free. Each person has a lifetime $250,000 exemption for the sale of their residence. A couple will have $500,000 exemption. This requires you to move, but tax savings on this can be quite significant.

We will go over this information in more detail and any imput you have is always appreciated.