Strategy

Document purpose: Demonstrate high lervel strategies and plans. These are only for inspirational purposes. Almost all investors have their own unique strategies.

Create your gameplan

Similar to investing in stocks their are thousands of ways to approach the market. Real estate investors tend to break off into specialties and strategies emerge from trial and error. Below are some common strategies at various levels of funding. Most people start in the lower levels since they are less capital intensive. This is not a comprehensive guide to real estate strategy. This is a quick outline to motivate you into creating your own strategy to become a successful real estate investor. Here are some questions to ask your self as you read below.
How much can you afford to bid on a property?
Do I plan on selling it immediately?
If I sell, am I selling to cash buyers, am I willing to wait for standard financing FHA buyers?
How much can I sell the property for?
How fast am I likely to sell it?
Are their association fees?
Should I invest money into the property to raise its price?

1. Low Price, no repairs, immediate flip

Target price: $5,000 - $15,000.
Goal: acquire an extremely low end property that is not livable but has a higher resell value to another investor. Resell to another cash buyer investor.
Advantage: The low end of the market has quite a few selections to offer, the acquisition and sale are generally quite fast.
Disadvantage: profit margin's are better at the higher levels. A lot of the lower end properties are "wood frame" and can have serious termite damage. Property is likely not in the condition to qualify for FHA financing from a prospective buyer, limiting buyers to only other cash investor to sell too.

2. Low Price, purchase broken, fix and Sell

Target price: $10,000 - $25,000.
Goal: acquire a low end property and fix it to minimum living standards for a private cash buyer, or a regular purchaser with FHA financing to live in.
Additional investment : $10,000
Advantage: If you have an eye for opportunity and are good with your hands, you can significantly increase a properties value.
Disadvantage: Requires more effort, planning, and time. Rehabbing houses increases risk of things going wrong, bad workers, bad weather, anything. Lower end properties have lower profit margins, so your efforts will not pay out as much as middle tier properties. Lower end neighborhoods are harder to sell in but easier to rent.

3. Low Price, purchase broken, fix and rent

Target price: $10,000 - $30,000.
Goal: acquire a low end property and fix it to minimum living standards for a renter. Hold onto the property for at least a year, acquiring rent, building appreciation.
Additional investment : $15,000
Advantage: Works great for Section 8 subsidized housing which can compensate up to 80% of the rent. Works great for investors that have full time jobs and want permanent recurring income. High Return on invesment. Can also display legitimate income under an LLC giving you corporate loan potential in the future. Recurring income is incredibly valuable long term.
Disadvantage: Bad tenants can turn a deal sour. Profits are slow but continuous. In some circumstances upkeep can be a pain.

4. Medium range, parse and rent/sell

Target price: $30,000 - $50,000.
Goal: acquire a property that is zoned for multi family units, is at least 1,600 sqft, but is currently only a single family home. Separate the single family home into two separate units increasing its potential return on investment and thus justifying a higher sale value.
Additional investment : $20,000
Advantage: Multi unit residences sell for much more, due to their income potential, increased ROI. You have the option of selling for immediate profit or collecting rent at a high ROI.
Disadvantage: Medium levels of capital required, rehab intensive, bathroom and kitchen installation is expensive. Multi unit zoning is generally in less than desirable neighborhoods. Additional research is required for zoning laws and maps.

5. Mid price range, live in

Target price: $50,000 - $80,000.
Goal: Acquire a property and actually live in it. Payment free.
Additional investment : $5,000~
Advantage: Living without a mortgage is a massive cost savings. Living in a property that you have 100% value in is a great financial move. You could than have the option to take out a second mortgage on the property, and thus get the equity back out to continue investing. This is called the "Tap out" strategy. The equity can than be transferred from one property to the next.
Disadvantage: Most people do not have 50k, and if you do, you are probably not willing to live in a 50k house. This plan takes a specially devoted individual.

6. Mid to high range, fix / flip

Target price: $60,000 - $300,000.
Goal: Acquire a property that you have researched and believe will sell for more.
Additional investment : Can vary greatly
Advantage: At these higher levels, smaller percentage profits are still large sums. a 100k property can be bought and sold in 2 months for 125k.
Disadvantage: Capital intensive, requires partners or financing to get this capital ahead of time. There is more at risk, further research and due diligence required to make sure the property will sell for predicted price.
Is rentable, but rent money would return a lower ROI than some of the previous strategies.

7. High range, flip

Target price: $250,000 - $1,000,000.
Goal: Acquire a property that you have researched and believe will sell for more.
Additional investment : Can vary greatly
Advantage: Huge profits. Few investors are able to compete at these levels allowing more deals open on the table.
Disadvantage: Capital intensive, higher stakes.