How to Profit from a Niche Real Estate Market
by: Guest
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Word Count: 625
There are many real estate investors who have been successful following
a proven business plan that starts with the purchase of a targeted property,
followed by whatever up-dating, renovation, or rehab is necessary, in order to
quickly market and re-sell the property at a nice profit. Experienced investors
sell tickets to seminars across the country, inviting others to share in the
wealth and potential in various real estate strategies. These people are not my
audience, although I wish them continued success. My proposition is one that is
often overlooked, in a particular market that offers a mutually beneficial
upside and potential, if the investor has the patience to accept a longer time
period for return on the initial investment, and some desire to participate in
community building.
Real estate can still be purchased in rural and
depressed markets at bargain basement prices. I have purchased homes for as
little as $10,000 cash, and marketed them myself in small communities in
Rather than performing any rehab, or as little as
possible to make it livable, the house is immediately marketed “as is,” with
owner financing. A “For Sale By Owner” sign, some flyers posted around town,
and an ad in the local paper usually provide plenty of potential purchasers.
Most of the homes I have marketed were solid bargains in the 29-40k range, and
most buyers, even those with less than perfect credit scores, were able to
acquire at least the 10% minimum down payment requirement, as well as required
insurance. After a credit check, the buyer and seller execute a Deed of Trust
Mortgage and insurance binder, and the property is exchanged. It really is that
simple.
After closing, the investor retains the down payment,
a vendor’s lien on the property, and a 10, 12 or 15- year mortgage at 14.25%
interest. After this, one of two things will happen. Either the buyer will pay
his mortgage faithfully, which, over time, will transform the mortgage paper
into a valuable financial instrument, or, in the worst case, the buyer
defaults, and the property is foreclosed and resold.
Generally, the
investor can expect at 25% rate of default, but with careful buying, and
setting the term so that the monthly payment is comparable to area rentals, it
is easy to find a qualified buyer who is willing to commit to the purchase with
a significant down payment, reducing the chance of foreclosure. Finally, after a payment history is
established, sometimes in as little as three months, the mortgage is marketed
and sold, and the investor’s cash and profit are returned in a relatively short
period of time, with minimal time spent on unneeded major improvements to the
property.
Perhaps most real estate investors aren’t aware of the
size and potential of this market, or of the families whose lives are changed
when they find their own version of the American Dream with the purchase of
their first home. In my experience, this market has been, unfortunately, passed
over and undervalued, and although I may never completely need (or want) to
understand and maintain the business side of this plan, I am proud to attest to
the positive difference that homeowners make in small communities where
modestly priced homes are rarely offered, or traditional financing is
unavailable or denied to potential buyers. This is the real niche in real
estate for me. Both sides win.
About the Author
Nancy Drew is a
professional author who resides in Austin Texas. She is very knowledgeable to real estate
& related fields.
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