HOUSINGNEWS REPORT
AN ATTORNEY’S GUIDE TO REAL ESTATE INVESTING
potentially make him or her a profit, purchases the asset, and “flips” it for a profit. Most investors who employ this technique buy a home with the intention of holding it for a short period of time, usually six months to one year, and reselling it. The strategy can be challenging, in that the investor needs to identify properties that are significantly undervalued for their neighborhood while ensuring that the cost of repairs or renovation will not eat up too much of the potential profit. The recent recession provided ample inventory and opportunity; however, many contend that opportunities in larger markets like California have become oversaturated. The lower value must provide enough equity so that the investor can make improvements and still be able to sell it at market value and earn a profit. Another challenge is that the improvements to the property have to be appealing enough to compel
“The neighborhood where the property is located will influence the type of tenants you will have, and your vacancy rate. By choosing the right neighborhood, you reduce the risk associated with high tenant turnover rates. Choose the wrong area, and you may be saddled with bad tenants, lower rent, and damage to your property.”
Based on the location of the property, appreciation rates may vary, but the value of the property can increase by double digits over a relatively short period, particularly in high profile regions such as Southern California. The neighborhood where the property is located will influence the type of tenants you will have, and your vacancy rate. By choosing the right neighborhood, you reduce the risk associated with high tenant turnover rates. Choose the wrong area, and you may be saddled with bad tenants, lower rent, and damage to your property. There is also concern over the maintenance of the property. Many times, a rental property will need exterior and interior work after it is purchased. The difference between
being a landlord and participating in other types of real estate investments is the amount of time you must spend renovating and maintaining it. You could hire a professional management company, but then, of course, you would have to deduct that expense from any potential profits gleaned from the property. Fix-and-Flip Properties This type of investment has become very popular because of a massive number of older homes hitting the market since the 2008 recession. Reality television shows have furthered the popularity of fix-and-flip investments. The fix-and-flip strategy is the opposite of buy and hold. It is similar to trading stocks, in that, an investor identifies an asset that could
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JULY 2018 | ATTOM DATA SOLUTIONS
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