Group 15 Real Estate works with a large number of unique investors on the acquisition, disposition and management of a wide array of real estate investment properties. We also maintain a “hot list” of hundreds of investors to email out a variety of analyzed deals on a regular basis; including everything from a $25,000 distressed single family unit to multi-million dollar multi-family opportunities. This page includes information about the variety of strategies we employ to help all our investors, from first-timers to seasoned veterans.
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 4-8% range, but in a down market you can seek more aggressive CAP Rates in the 9-12% 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: 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: 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.
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 crews 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.
Short Term: Flip & Sell Immediately
This strategy is very popular during a real estate boom as home prices appreciate very quickly and there is a high demand for real estate. However, in most markets, this strategy is very risky and only the extremely seasoned investors should be attempting this strategy.
- 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.
If you are able to leverage a cash offer it will generally afford you a lot of obvious benefits, including a better sales price, lower closing costs and optimal cash flow.
This will generally require a 20-40% down payment. We can help facilitate your needs with the most suitable mortgage lender.
- Roth and SEP IRA's are eligible.
- You will need to appoint an IRA custodian who will purchase the property on your behalf.
- You can conjoin your IRA funds with specialized financing.
- The purchase must be an arms-length transaction and may not include parents, spouse or children; but it may include siblings and other family.
- All expenses related to the property must come from the IRA. Similarly all profits will be directed back to the IRA. Think of it as truly diversifying your retirement account.
- This is a process that allows you to defer the capital gains tax on the sale of one investment property to the purchase of another investment property. It is a very popular and useful investment strategy.
- You must use all of the net proceeds from the sale of your initial investment property on the purchase of your next investment property.
- Per the latest IRS rules, once you sell your initial investment property you have 45 days to identify your next acquisition and 180 days to purchase.
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