Residential

Fix & Flip Properties (Rehabbing)

Properties that are purchased 20% to 40% undervalue. Some of these properties do not need work but most of them will require some type of improvements to bring them up to standard to be placed on the market. Having everything scheduled and budgeted prior to purchasing the property is key to making this strategy successful. Pricing these properties as close to market or 5% under will ensure that the property is sold in a timely fashion.

Rental Properties (Buy and Hold)

  1. Long Term Rentals - probably one of the best ways to create wealth in real estate by buying and holding properties for more than 1 year. It is also best to purchase these properties under value because making these properties cash flow is very important. We recommend hiring a property management company so that you do not have to be involved with the day to day activity of being a landlord and all of the leases have been created by a professional. Assessing the amount of money it will take to make these properties rent ready and quickly bringing the property to the market is vital.
  2. Short Term Rentals (Vacation Rentals) - Short term rentals can generate more gross rent than a long term rental however they require more day to day involvement. Landlords get more money for these rentals because the tenant commitment is for a shorter period of time and the owner has additional exposure to not receiving rent for longer periods of time. In great locations or resort areas vacation rentals can generate a lot of income during certain times of the year when the area is in season for tourists. This can be a good strategy if the owner also wants to use the property too.

Lease Option Properties

This is an alternative to leasing the property that allows renters the option to buy the property. Each month’s rent can have a portion that is applied to the purchase of the property. This is a great way to get a higher rent and sometimes a deposit of up to 5% of the agreed upon sales price. Although, most lease options do not come with renters that have a down payment for the option this is a good way to have a renter that cares about the house and most often takes better care of it. You can also negotiate to not make repairs if the tenant has the option to buy. A very small percentage of lease options tenants actually end up buying the property but an owner should look at the contract carefully to make sure that their basis is covered in the agreement.

Multifamily

Added Value – this strategy is used to buy run down apartments at a high cap rate because the rents and occupancy are depressed due to the condition of the property. Just like the fix and flip strategy a budget and timeline are essential to making this strategy successful. Market rents and unit mixes are critical to analyze when identifying a property because the gross and net rent of the project will determine your value.

Cap Rate – this strategy also involves creating additional rental income. This can be done by buying a property with depressed rents or high vacancies due to mismanagement. These properties are usually purchased with the ability to create double digit cap rates for the investor and selling with cap rates under 9%. Holding apartments for long periods of time also allows the cap rates to stay in line with inflation creating equity over longer periods of time. Multifamily is a much easier way to create considerable cash flow and a centralized management of only one facility with multiple units.

Lots and Land

Develop – this strategy works well for an investor that has time to manage a project. The investor creates equity by taking the time to improve the land or construct a dwelling on a site. Strong consideration must be taken into account when purchasing the land to ensure the project is feasible. Buying land that already has the entitlements and plans finished is a bonus because this saves a lot of time in the development process. If this is not the case, preparation is a key factor to find and architect, engineer, and general contractor so that an investor can begin to calculate the total cost required to finish a project.

Entitlement – this is the strategy of buying raw or undeveloped land and going through the county or city to obtain the best use of the property and presenting the plans for approval. The equity is created when the plans are approved because the buyer of the land knows what they can develop and does not have to speculate on what they can build or wait for the city to approve the plans.

Commercial

Added Value - this strategy is used to buy run down commercial properties at a high cap rate because the rents and occupancy are depressed due to the condition of the property similar to multifamily. This strategy requires budget and timeline in order to determine if a project is feasible. Market rents, location, and property types are critical to analyze when identifying a property because the gross and net rent of the project will determine your value. Market rents and owner credits for tenant improvements must be determined for what is typical in the area when looking at the potential gross income for a property that the lease or multiple leases will generate. Triple net (NNN) leases are the most desirable because the tenant pays all of the additional expenses including but not limited to taxes, insurance, utilities, and common area maintenance.

Cap Rate – this strategy is buying double digit cap rate buildings that are below value, under market leases, or vacant buildings. There are a number of different ways to create equity in commercial buildings. One of the easiest ways is to buy an office condo shell, find a tenant, and construct the tenant improvements and collect the rent. The leased investment that is sold on a cap rate creates significant equity and allows an investor to buy the property at an established rate of return for their investment. There are also opportunities to create equity with mismanaged buildings that need to have rents raised or improvements that need to be made to the property in order to fill vacancies. All of these methods provide lucrative opportunities for the investor that has substantial reserves to participate in the commercial market.