Make Money Buying and Selling Property
By Steve Gillman - 2007
The obvious goal in buying and selling property as an investment
id to sell for more than you buy for. But there are a number
of ways to accomplish this. We'll look at six of them below.
Buy and Hold
Real estate has been a particularly bad investment for this
strategy lately, since holding has meant watching the value go
down. But that may change soon, and some areas are already seeing
price appreciation. Looking for where the growth is in a community
and buying in the path of that growth is one way to better the
odds of decent appreciation. Keep in mind though, that this works
best if you have cash to invest. If not, the property has to
go up in value fast enough to cover your interest cost and any
other expenses (like taxes) just to break even someday.
Buy and Add Value
Sometimes there will be relatively simple ways to add value
to a property to increase the price you can get. You might buy
a lot which has difficult access, for example, and put in a driveway
or access road. Or you might clean up a piece of land that has
junk and/or piles of dirt on it. The following three suggestions
cover ways to add value.
Buy and Change Use
If you can get a property rezoned you might increase the value
in a matter weeks. For example, buying and selling property that
is zoned for rental homes, but getting it rezoned for commercial
use, can be a method of getting a (relatively) quick profit.
Normally this will only be possible with properties which are
at the edges of areas already zoned the way you want your to
be zoned. To use this strategy more safely, you might get an
option on the real estate and get the zoning change before you
are actually committed to buy.
Buy for Cash and Sell on Terms
An easy way to add value to any real estate is to make it
easier for a buyer to buy it. This can be done by offering a
low down payment and carrying the financing yourself. It is safest
to do this with raw land, because there is little that the buyer
is likely to have damaged if you are forced to foreclose and
resell the property. I have sold property for as much as 30%
more than I paid (and in just weeks in one case) by buying for
cash and then offering easy payments.
Buy and Raise Income
Whether it is leased farmland, and apartment building or a
strip mall, income property is valued according to income. That
means if you increase the income it produces, you have probably
just increased the value. On the buying end, look for properties
that are rented at below-market rates. While you have it, raise
rents to a market level, and look for any other ways to generate
more income. This could mean adding rented storage units to an
apartment complex, leasing more of a piece of land for crops
or Christmas trees, or lowering the expenses in order to raise
the net income.
Buy Cheap and Sell High
This is perhaps the obvious dream of every investor, and it
is entirely possible to find distress sales and other opportunities
for buying and selling property based on this most basic of strategies.
But since transaction costs can easily run 10% of your investment
for buying and selling, you need to get a really good deal if
it is your only strategy. For best results, then, combine
this with one or more of the other suggestions above. For example,
if you can buy a vacant lot cheap and for cash, change the zoning
to make it worth more, and sell it with easy terms, you could
make a great return on your investment.
Another page you might want to read:
How to Sell a House
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