Real Estate Buying - 3 Ways to Maximize Your Profits With no extra value, there are no gains. That is true with any business, but what makes property such a wonderful business and a wonderful investment, is the variety of ways that you can add value and cash in on big profits.
Here are three ways that you can add value to your possessions. Some repairs add a great deal more value than it costs to perform. By way of instance, I have a customer Darwin Horan that adds square footage to each house he buys. He actually likes the inner city properties since they're the toughest to include square footage.
There's not typically enough land on the whole lot to bring an addition by upping the foot print of their property. This client does lots of basement finishes and "pop tops," but where he's made the most money is the cellar that's just 5 or 6 feet deep. Something most investors wouldn't think of, so he's able to get the deal many other investors pass on.
I also have seen some investors like Darwin Horan find homes which don't actually fit into a neighborhood and they make them match. This might be restricted bedrooms or baths or funky floor plans. All that may be changed. Clearly many cosmetic fixes like bathrooms and kitchens include a good deal of value too.
There's a whole lot more to it than that, but the idea is to get a property in its true 'as is' worth, (do not over pay), and then add value with all the repairs and updates. Owner Finance: I really like this one because it's really simple to add value with very little to no work. You'll have to wait to profit on your own profits, but it's a means to boost a market significantly. You may also use this strategy to increase tax gains over a couple of years, rather than taking a major hit all in 1 year.
When you've got a property available are a limited number of buyers for your home, although right now that pool of buyers sounds pretty large. If you are able to increase the pool of buyers, then the requirement for that 1 home increases, which forces the price to go up. Someone that cannot be eligible for a typical loan, restricting the supply of homes to pick from for that purchaser, will probably purchase your property. That also raises the price. You're adding value by providing them the opportunity to get a house that they normally wouldn't be able to have.
With this value, you should be compensated with a higher cost and a good rate of interest on the profits, as you await the buyer to refinance and pay off you in full. Shared Units: This is one area of property I have not dabbled in, but it's very inviting. The idea here would be to offer your property to multiple buyers. You're seeing this a lot in resort cities. It's always a holiday or second home. They are pretty enticing are not they? We chose to go since they offered us free tickets to Disney.
They were quite good at promoting the "thought" of the time talk and had my ex spouse sold. She asked me to proceed with the deal, but I couldn't bring myself to do it. I advised her that I wasn't familiar with an emotional purchase and that we had time to think it through. As we rode back to the hotel that day, I started considering the math. Each unit can be offered to 52 distinct people because your buy just gets you 1 week annually. Add that to the yearly maintenance fees and the amounts are staggering. I know those who have flipped time stocks successfully, since you can get them for free or near free on Craigslist, but it's not an investment that I was considering. That said, I've considered doing a half or quarter share on a home in a ski town in Colorado. In this scenario, you're sharing a home with 1 to 3 other individuals so there's a lot more flexibility. You may use or rent out your weeks and you can be ensured valuable high demand weeks each year. It's a way to acquire a second home without the complete expense. 1/2 a share of a home will cost the buyer more than 1/2 of their fair market value. I've seen business plans from investors who would purchase a home and quarter discuss it out. The idea was that after they improved the property and sold 3/4 of their home to 3 distinct buyers, they would have the previous 1/4 clear and free. Obviously this strategy will work best in places where folks want second homes.
The drawback is if there are any improvements or significant difficulties. I can see there being disagreements, so this is something that you would want, as a purchaser, to work out with the rest of the owners in writing before you purchase.