Every experience in life offers us an opportunity to learn but not all of them offer an opportunity to earn money at the same time. Real estate is great in that it will offer you both. But it can also lead to some tough lessons and heartache if you don’t have an idea about what you are doing or choose not to listen to mentors or experience real estate investors. Doing a first deal in all cash is a good way to get in on a smaller deal and learn about the process, what to expect and if you even really like the business of real estate investing.
Purchasing a more affordable property lets you pay cash for the property and use your remaining cash to fix us the place and build a little equity. With a face lift and some new paint, you can be ready to remarket the house for a profit or begin to rent or lease the property. This is where you need to stop and think about your goals for the future. Do you want to leave your money tied up in this property with the hopes of finding a good tenant who will pay rent on time and regularly? This would create a stream of revenue that you could count on more long term. Also it would be good to hold the property and watch the value increase while you have a tenant playing for the use of the place. A slight twist on this plan is to do a rent to own or lease to own with your tenant. It might be a way to help someone out who isn’t currently able to get a mortgage and to get you some cash flow. Not every rent to own deal works out but if it does it is the best of both worlds for you and the buyer.
Your other option is to put the house back on the market and hope that your sweat equity is enough to draw new and more motivated buyers to the home. In this case, you would need to pay for some advertising and be able to cover the carrying costs until the property sells. But once it does sell, you have not only your initial investment back but also hopefully a profit. You will need to pay the tax on the capital gains but the rest of the profit and the seed money are back in your hands and ready for the next investment property purchase.
There are many aspects of your first real estate investment deal that might help you decide if you want to rent or do a fast sale. Maybe the renovation process was more work than you expected and you are not ready to commit the time to beginning a new project right away. If that’s the case then rental income is a plus. If you had a great time with the sweat equity process and can’t wait to do even more projects on your next house then try to sell quickly and move your profit into the next home. Either way, understand that your early transactions in real estate investing will be as much about learning the business as they are about making a profit. Visit www.azrealestatewholesale.com to learn more about working with a team of professionals for your first few real estate investments.