How to Make a Career in Real Estate in 2010

Six Steps to Real Estate Investment

There are many variables to look at when determining suitable
investments.  I’ve worked closely with an investment fund that purchased
over fifty distressed homes in King County that ranged from
development projects to turnkey deals.  I’ve summarized what I believe
are the most important elements.

1. Location
2. Price
3. Cash flow
4. Financing
5. Fixup
6. Finding
   the Right Agent

While my posts will focus on real estate investment in Seattle and
King County, it likely applies for investment in other areas as well. 
When you look at real estate investment there are two primary ways to
make money:

1. Price appreciation
2. Rental income

And generally speaking there are two ways to go about it as well 1)
Flips and 2) Rentals.

Flips

For investors (or speculators) who wish to get the highest return
“flips” get you most bang for your buck.  Flips require more work and
entail more risk than rentals.  Flipping properties were very popular
pre-2007 housing crisis that left many investors in a jam.  When
property prices dropped precipitously it forced many investors to hold
their short-term investments indefinitely or even face foreclosure.

In order to cover the 8.5% transaction cost hurdle often times you
must add value to the property through remodeling.  In rare
circumstances can you flip a property with no work (turnkey properties)
and make a profit unless you have the inside track.

In most cases with short sales and bank owned properties, the homes
have been neglected for months on end.  A leaky roof becomes a pool or
an abandoned house leads to vandalism.

Rentals

Rental properties are less risky and more straight forward.  The
ultimate goal is to cash flow positive and get a reasonable return on
your cash outlay.  You will focus more on the income component than
price appreciation.