Real Estate Investing Tactics (2010)

By RealtyTrac Staff

Investing in real estate, like any other investment, should be approached cautiously and prudently. Here are seven investing tactics that can help you build wealth and financial stability in the years ahead.

1. Buy Short Sales
2010 will be remembered as the year of the short sale. Sales of properties in some stage of pre-foreclosure accounted for nearly 12 percent of all sales in the first quarter of 2010, up from nearly 11 percent in 2009, according to RealtyTrac.

2. Buy Bank-Owned REOs
Short sales can be time-consuming and difficult transactions to complete, which is why bank-owned REOs are appealing to many investors who want a quick transaction and clear title. If you’re in the market for a home, an investment property or a vacation rental, you may be tempted by the low prices on bank-owned properties.

3. Buy at Public Foreclosure Auction
Buying at the public foreclosure auction requires significant amounts of cash and does not typically allow for a full inspection of a property prior to bidding. However, lenders are becoming more willing to discount opening bids at public foreclosure auctions, giving knowledgeable and careful investors an opportunity to buy far below market value.

4. Buy Low and Rent
With prices at 2003-or-lower levels, bargain-seeking buyers might want to consider buying low now and renting until the housing market recovers. Rental rates in many areas comfortably provide a monthly cash flow after mortgage, taxes, insurance and other expenses that come with owning investment property.

5. Buy Low and Flip
If becoming a landlord is not appealing to you, you might want to consider buying and flipping foreclosures. That’s what Jon Mirmelli, a Phoenix real estate agent and investor does. He buys foreclosed homes for cash at the Maricopa County courthouse and then quickly sells them for a profit to homebuyers and investors. Power-flippers are also making a comeback Arizona, California and Nevada.

6. Buy a Vacation Home
A well-purchased vacation home gives you an inexpensive place to land periodically throughout the year for some rest and relaxation, but it also can generate substantial rental revenue when you’re not using it. In hot vacation spots, demand is high for affordable alternatives to hotels and motels — especially from vacationers planning to stay a week or more.

7. Buy With Cash
Cash buyers are king in a real estate market where tight lending guidelines dominate and prospective buyers who use financing are restricted in their ability to make quick and flexible offers. Cash buyers appeal to banks and other sellers because their offers can be closed quickly and without the contingency of final loan approval.