This is the third edition to the Trisha Allen’s Guide to Real Estate Investing, written by Trisha Allen of Building an Empire.
As a reference, the Active/Passive measure is a five star scale with one-star being the most active and five-stars being the most passive.
Commonly known as “flipping” or “resaling”, purchasing a residential or commercial property to sell for profit can be very lucrative for you or absolutely disastrous! You can perform every type of inspection known to man but still not be able to anticipate every “gotcha” that comes your way! With real estate markets plummeting in certain areas of the country, flipping has become a risky business indeed. The idea behind this type of investing is to benefit from the profit made by selling a property for more than you paid for it, plus any expenses you incurred during your ownership. Land can be flipped for a profit as well.
Fix-And-Flips – After purchasing a property for the right amount at the right time, performing the right fixes for the right amounts, and selling at the right price at the right time, an investor can make a killing! (That’s a lot of right’s that could go wrong!) Fix-And-Flips take a lot of know-how, money for repairs and upgrades, intimate familiarity with the local real estate market, good project management skills, and a little dash of luck to boot. There’s nothing passive about this type of investing, either. Don’t be fooled into thinking that you can hire a contractor and trust him or her to get the job done right, on budget, and on time! But, with greater risk, comes greater rewards…maybe.
Entrance Difficulty Level: Difficult
Wholesaling – Frequently an entry point for beginner investors, wholesaling involves purchasing a property or putting it under contract at a discounted price while the wholesaler locates a buyer to purchase it from them for a higher price. The property is flipped immediately after purchase—without any upgrades being performed–or possibly before the closing even occurs! The wholesaler can accomplish this by either holding a double closing (which is when two closings happen back-to-back from seller to buyer, then from the first buyer to the next buyer) or by assigning their position on the contract to the next buyer for a fee. The biggest risks for wholesalers is being stuck with a property they cannot sell for a profit, or losing their earnest money if they cannot locate a buyer and decide not to close on the property at all.
Entrance Difficulty Level: Easy
Final Edition: REITs & Tax Liens
I’ve done real estate investing successfully since 2003 and have blogged about it since 2005. A word to the wise: before you invest, check with an attorney and a CPA to evaluate your goals, investing options, and the laws in your state. You can read more about my own experiences at TrishaAllen.com.