Guide to Short-Term Real Estate Investing

Like any other investment, real estate investing also has its share of risks and rewards. With the right kind of knowledge and training, real estate investing can be turned into a lucrative business. There are two broad categories of real state investments - short-term and long-term. Although long-term investment in real estate is quite profitable and is suitable for building wealth, most professional investors prefer short-term investments because they can turn in profits much faster.

Long term investment involves holding properties for several years and selling them when the value of the properties has appreciated substantially, thus making a nice profit. On the other hand short-term real estate investments involve purchasing a property and selling it within a few months. Sometimes the term of investment is really short. Short-term real estate investments work best in rapidly appreciating real estate markets. In rapidly appreciating real estate markets the wait for profit is very short.

One of the strategies of short-term real estate investing is the quick turning of properties for profit. This strategy is best for making quick cash. In this strategy the house or commercial property is contracted at a low price, then sold at a higher price either with or without improvements. It may be a wholesale quick turn or a retail quick turn. In wholesale quick turn the property is sold to another investor and retail quick turn the real estate property is sold directly to the buyer.

With this strategy the short-term real estate investor can easily make from $2,000 to $30,000 depending on the market conditions and the type of property involved. The advantage of this strategy is that the short-term investor is able to avoid the need for financing. He simply puts the property under contract, finds a buyer ready to pay a higher price and assigns the contract to the buyer. The buyer actually closes and buys it from the seller. The investor is paid the assignment fee as agreed upon. This strategy can also be applied to properties facing foreclosure.

The other strategy is to buy property which needs lots of renovation or repairs. The investor is able to get a deep discount on the property just for this reason; the owner wants to sell the property but does not have the wherewithal to carry out the renovations or repairs necessary to get a good price for the property. The investor buys the property at a deep discount and carries out the repairs or renovations necessary. For this strategy to work a thorough inspection of the property needs to be carried out and the cost of renovation and/or repairs needs to be calculated accurately. The investor must also have access to quick short-term finance at a reasonable rate.

For profiting from short-term real estate investing some favorable conditions are required. First and foremost the property values should be rising in the area at a stable rate. If you are thinking of flipping a house, that is buying a house that needs repairs at a deep discount, then it may take up to six months to get the property ready. You must be sure that the market will be rising until that time and there will be a good demand for similar homes or at least the market will remain steady. You must have the necessary experience and/or the right connections to get the house ready at a reasonable cost. Any cost overruns or unexpected repairs can eat into the profits.

Even though short-term real estate investing appears to be very lucrative there are also some risks involved. The profit potential of a real estate depends heavily on market timing or being able to sell the property within the expected time. There are many factors that can hold back the resale of a property. Another factor is being able to get the property ready within the budgeted cost. Any overshoot of time or cost may make the deal less profitable or even a loser. In other words the property may take more time to sell or take more money to repair than expected. Short-term real estate investing requires a good amount market research, knowledge and also hard work.