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The underlying principle of every investment strategy is to buy low and sell high.  Your personal risk tolerance level will determine your interest in investments that are more secure but may take a longer time to develop into higher value or if you will seek investments that are riskier, but if you get in early could yield higher values faster.  The same is true for real estate, with the added benefit of a rental providing you with easy monthly income while you wait for your investment to appreciate over time. With that in mind here are some different strategic approaches to real estate that will help you think through what is right for you.

Long Term: Rent and Hold

• This strategy is best evaluated by simply looking at the CAP Rate of the Net Rental Income divided by your initial investment without factoring for any appreciation of the property value over time.  In a balanced market you will typically find CAP Rates in the 5-10% range, but in a down market you can seek more aggressive CAP Rates in the 12-15% range or higher.  We have the experience and calculations to help make sure you are factoring all variables when determining a property's true CAP Rate.
• Tenancy, Vacancy or Rehab?
  • Tenancy: One of the safest investments will be to find properties with tenants already in place.  This is a safe and proven method of building your rental portfolio, but it also has the least upside as there is a built in cost of someone else having assumed the risk of improving the property and presenting it in a position of cash flow.
  • Vacancy: If a property is vacant or has a poor rental history then you can negotiate a better deal than a property that is already tenant occupied with a good rental history.  In exchange for that better deal you assume some of the cost and risk of filling the vacancy.
  • Rehab: If you can find a property in need of some work to get it rent ready you can negotiate a premium price.  In this scenario you are assuming all of the risk involved with sometimes hidden costs on a rehab, but you also afford yourself tremendous upside and can end up with a very aggressive CAP Rate.
• Single Family or Multi-Family?
  • Single Family: These properties will typically yield you higher CAP Rates and lower vacancy rates.  However, the main downside is they are 'lumpier', meaning when you do have a vacancy you have lost a larger portion of your income.
  • Multi-Family: These properties will typically require a higher down payment if you finance and will yield lower CAP Rates and higher vacancy rates.  However, the main upside is more predictable and consistent income, due to a broader rent pool.
• TURN KEY VALUE of Group 15 Real Estate
  • Whether you are just wanting to buy a tenant occupied rental, or want to buy a place in need of filling a vacancy or even if you need to do a major rehab project, Group 15 Real Estate is a true turn key service that will address all of those needs along the way.  We have the rehab crew in place to take care of all of your renovation needs, the marketing team in place to quickly fill your vacancy and the property management in place to service all of your ongoing needs.  All you need to do is collect the rental income checks each month.

Intermediate: Rent and Sell

• This is good for a strategy that you think has the opportunity to appreciate in value within the next 1-3 years.  In this case you will want to look at both the CAP Rate as well as a comparative market analysis to see how purchase prices are trending in the neighborhood.  It is always good to be willing to keep it as a long-term rental as a backup strategy in case your preferred exit strategy of a sale does not pan out.
• Sale or Lease Purchase Finance?
  • Lease Purchase Finance: This is an excellent exit strategy for this type of investment.  It allows you to rent for a period of time with a pre-negotiated sales price and date without ever having a vacancy.  Go HERE for more information on the seller advantages of Lease Purchase Finance.
  • Sale: The advantage of Lease Purchase Finance is to have all of the terms pre-negotiated and an exit plan all laid out.  The sales prices on a Lease Purchase Finance will be top value for today's value, but may be less than top value at the time of the sale in one or two years.  The advantage of holding out for a sale would be to try to maximize the sale price potential at the time of the sale.

Short Term: Sell Immediately

• This strategy was very popular during the real estate boom as home prices appreciated very quickly and there was a high demand for real estate.  However, in today's market, this strategy is very risky and only the extremely seasoned investors should be attempting this strategy (and most of them have abandoned this approach).
• Rehab or Wholesale
  • Rehab: One approach to the short-term sale is to find a property in need of a great deal of work where most of the value can be added in the rehab and the property can be sold for a profit.  This is a tough market, that relies on finding the right unique opportunities and having the right rehab team in place.
  • Wholesale: This approach involves find purchase opportunities that others cannot find and getting properties at incredible discounts that can be sold for a profit to other investors without having done any work to the property.  It requires a good network of both connections to sales opportunities and connections to investors looking for those opportunities.  It will require cash and often, involves only owning the property for a day while you sell it to the next investor.  This is highly touted by get rich quick specialists, but extremely challenging to perform correctly.