Is Now a Good Time to Invest in Real Estate?

A question I get asked all the time is “if now is a good time to invest in real estate?” It’s funny, sort of. Because when the market was tanking the majority of people were selling their real estate, thinking now is a terrible time to invest in real estate!  And now just a mere 5 years later, the market resembles the bubble and people are not selling, they’re happy as clams, and people are scrambling to buy real estate.  So, I ask you, when the market is high – is it a good time to invest in real estate?

The answer:  “It’s always a good time to invest in real estate. It just depends on how you invest.”

If you’re asking yourself, um, “Grace, what do you mean? Isn’t there only one way to invest, and that’s to buy real estate?”  Then, let me explain.

Here are 7 ways to invest in real estate:

1. Buy Low – Sell Higher
2. Buy Low – Assign to Wholesaler – Sell to Fixer – Fix – Sell to End-Buyer
3. Buy Low – Fix – Sell to Wholesaler – Sell to End Buyer 
4. Buy Market Rate Over Time by paying the Seller on an Interest Bearing Financed Transaction (Trust Deed/Mortgage Secured)
5. Buy Performing Notes (Could be from Seller Financed Deals or from Banking Institutions)
6. Buy Non-Performing Notes (Could be from Banking Institutions selling their bad debt Trust Deed/Mortgages)
7. Invest in Other People’s Real Estate Investments and Collect Interest Earnings!

That’s the short-list!  There are tons of ways to invest in real estate!
Which takes the most amount of effort/time and management?
Which of these takes the least amount of effort?

Takes the most amount of time from the investor number 3 “Buy Low, FIX – Sell to Wholesaler – Sell to End Buyer. The reason why this particular model takes the most time and participation is because of the word FIX. In this model the investor is doing the Rehabilitation of the property.  This can be the most lucrative for the short term gain, and also cause the most income tax. But hey, what’s a little tax (potential 25%) if you’re making money?

The model that requires the least amount of time from the investor is number 7.  Here you’re providing your cash to someone else to do the work, do the deal and you just collect, collect, collect interest.  This is a great way to invest with your IRA. I have done this with other investors, and I love to put my IRA to work this way. I get a copy of the Trust Deed, or Mortgage, which has my IRA name on it as the beneficiary, and have an agreement as to how much the IRA is lending, and how much interest the loan is paying, and when the payments are due. The loan agreement says what the term is (how long) and when and how it’s payable.

In the next article I will introduce the principal of the Accredited Investor Concept put into place by the US Congress in 2010, and how that might affect you.

Do you want more information on investing in real estate?  Get the investor’s report! There is so much more to learn!

One principal purpose of the accredited investor concept is to identify persons who can bear the economic risk of investing in these unregistered securities.

The rules defining  accredited investor were changed  with the passage of the Dodd-Frank Act to exclude a primary residence from the net worth test. This means that some investors who were accredited investors prior to July 20, 2010 are now not accredited investors.