In this blog I will be discussing the different types of investing in real estate. I have found out that when most people think of investing in real estate the first word that pops in their head is “flip”.  That is only one of many ways to invest in real estate. A local lender told me this when his CEO visited them at a retreat. He spoke about the Charleston Market and how he, like the many experts, felt the Charleston Real Estate Market will be one of the best in the nation. With the instability in the bond, mutual fund and stock markets investors are looking for something concrete. (literally)  I would like to go into detail about several reasons experts believe our market will be one of the best but I will save that for another blog.

The most common call I receive when it comes to investing in real estate is about foreclosures and short sales. I will eventually post a blog explaining the process of buying a foreclosure or short sale and how they differ. A foreclosure or short sale can be great buys for investments but more importantly first-time home buyers. Foreclosures/Short Sales are priced extremely well to avoid low-ball offers. This means that in most cases they sell extremely fast.  Foreclosures/Short Sales allow buyers to buy in communities that they could not normally afford to live in. It also allows them to possibly have some equity and use the home as a stepping stone.  In most cases the home will need immediate attention cosmetically. We call this swequity.(sweat+equity)

On the beaches you have vacation rental investing. This by far is the highest dollar amount return you can receive.  The actually percentage return is not nearly as good as another type of investing that I will explain below. Foreclosures on the beaches are a little rarer than the surrounding areas.  With that said, beaches have depreciated drastically in the last few years and many believe this has created great buying opportunities . That means you have a chance for instant equity or possible appreciation in the future. To obtain the highest ROI (return on investment) then beachfront is the way to go.  We have several homes for sale and in the rental program. Examples include a 2.1M dollar property that returned over 100K in rental income during its first year in the program. We have 1.1M dollar listing that returns about 80K a year. Once you move from beachfront your dollar amount return begins to drop. If you are looking for the best returns based on percentage then some examples would be 2nd row listed at 499K and averaging 40K a year in rental income.

Another type of investing is in low-income housing. When it comes to investing in Charleston, this is your lowest risk. With Mutual Funds, Bonds and Stocks not returning what they have historically many people are pulling their money out and looking for other areas to invest in. This has had the highest demand for the past few years. The idea is to buy in areas that are low-income and at a price range of 70K or below. On average a 3 bedroom home rents for $725.00 a month. With the right agent and good negotiating you can also buy with instant equity. That means a 70K home rented at $725.00 a month would return at least 12% in rental income alone!  Any appreciation or equity is a bonus! These homes usually require low maintenance and with a good inspection you can know what you are getting into prior to closing.

There is also long term rental investing. This does not return as high a percentage as low-income investing but it can be a good investment.  The average 3 bedroom 2 baths home brings about $1200.00 a month in rental income. This does depend on the location and area. The idea is to find something below market value, rent it so it pays for itself and when the market is corrected sell for a profit. You will need a diligent and experienced agent to find the best possible buy at that time.

Lastly, you have flipping. Currently this is the riskiest way to invest in Charleston Real Estate. I prefer people  that are planning to flip to purchase the home with cash. This way if it ends up sitting on the market for a while you have very little overhead. The idea is to find an extremely good buy. It can be a total renovation, tear down and/or a home that needs some “TLC”.  You would then purchase that home, have your contractors lined up and put the home back up for sale as soon as possible. Having experience in this type of investing I know firsthand what it takes to be successful. Cash is king when it comes to “flipping”.

We are also certified HUD buyer agents. Please contact me for more information.

THE FRED HOLLAND TEAM

Please consult your agent before purchasing a home. Please note that this blog is not a recommendation or advice on where and what to purchase. I cannot predict or guarentee any appreciation, equity or profits. There is always risk when investing.