The following are the main types of real estate investment properties that are suitable for beginner investors:
•Preconstruction Investment Property: These types of investment properties are acquired directly from a developer before the construction or renovation is completed. In return for commitment to buy even before the construction is completed the developer will give you a price discount and/or other financial incentives.
•Fixer Upper Investment Property: These types of investment properties are the ones which are in ugly condition and need renovation. These properties are acquired by real estate investors to flip them after fixing-up. In majority of the cases these properties are in foreclosure, or are bank owned properties (called REO which stands for Real Estate Owned). Some beginner investors also wholesale distressed properties to other investors without fixing them up. Real Estate Investors who wholesale make a smaller profit but are able to exit the deal fast and with low risk.
•Foreclosure Investment Property: These types of investment properties are the ones which you buy from sellers who are behind in their payments and may lose their property to the bank via foreclosure.
•Income or Cashflow Investment Property: These types of investment properties are the ones which generate rental income for the real estate investor. These are mainly apartments buildings and rental houses. This type of investment property is sometimes also called Income property, Rental Investment property or Cash Flow Property.
•Investment Property with Flexible Terms: These types of investment properties are the ones which can be bought with no money down or with very little money down. Seller of such properties are very flexible with their contract terms and are willing to make the sale easy for the buyer. Land Contract (also called Contract for Deed), Owner Financing, Lease Option (also called Rent to Own, Lease Purchase, Lease to Own, Lease to Buy etc) and other similar strategies fall under this category.
Most other types of real estate investment property deals are not suited for beginner investors. They are too risky or too complicated for beginners. My recommendation is to choose the type of deals beginners want to do and become very good at it. Master all the steps from finding the deal to exiting it, and become the best. If starters can follow this simple principle I definitely see them more likely to be successful in real estate investing.
1. Exchange of an Investment Property
One rule is that both properties must be of the same kind. Personal properties of a similar class are like-kind properties. Of course, personal and commercial properties are not like-kind properties. Also, personal property used predominantly in one country and personal property used predominantly in another country are not like-kind properties.
Exchanges are made for people wanting to stay invested in real estate, increase their leverage and to avoid paying high taxes upon the sale of property. Why do people prefer the exchange of an investment property? Well, there are several reasons: To restore depreciation by exchanging one property for another of greater value.
The exchange of an investment property can be used to combine the equity of several properties into one large investment. In some of the cases, investors choose exchange properties just to change the investment location (and this could be made for other several reasons, such as appreciation possibilities).
These are the different types of properties that can be involved in exchange investments: rental houses, apartments, commercial properties, raw land, office buildings, retail properties, ranches and industrial properties.
2. A Successful Tax Deferred Exchange
Here are the things that must be done to gain some tax money from an exchange of an investment property. First, to make sure your investments are compatible for this type of action, ask for professional advice from a financial advisor. After that, and after you list the relinquish properties, you can enter in contact with the buyer for the exchange or sale of the property you wish to relinquish.
Once you do that, open an escrow for the relinquished property and coordinate with the facilitator. All the exchange papers must be signed by all parties or the transaction will be considered invalid.
The rest of the steps are really not that difficult and will likely be taken care of for you by your broker. The rest of the process is straightforward and involves a lot of paperwork, but the benefits are worth seeing it through. Whether you want a more valuable property, or just want to have a property in another place, just remember that these can be done with no taxes involved. Many people dont know about this and are missing out on tens of thousands of dollars each time they move.
Both Dhruv Mehta & Derek Marsh are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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