Some real estate investors employ the real estate investment strategy of long-term wealth building. In long-term wealth building you buy and hold property for income and appreciation. This can be a very effective strategy in areas of the country that experience very high rates of price appreciation,such as California and the Northeast.
However, once you invest your money in real estate, it can be difficult to liquidate or sell your assets quickly. Because real estate is the biggest ticket item there is, it has the fewest buyers in the marketplace compared with any other commodity. The Quick Cash strategy addresses the problem historically associated with real estate investing: the lack of liquidity.
Quick Cash Strategy
We recommend you use a Quick Cash strategy to make money in foreclosures. Another name for the Quick Cash strategy is flipping. Flipping is the fastest way to make money in real estate. When you flip a property, you get in and out of a property in a short period of time.
Investing in foreclosures can be very cash-intensive. When you buy a foreclosure on the courthouse steps, you have to pay cash. There usually are fix-up expenses with foreclosures that require cash outlays. There may be carrying costs, like mortgage payments, property taxes, and homeowner association fees. You may have to flip your foreclosure property so you can get your cash out and be able to go in on another foreclosure deal.
10 Advantages of the Quick Cash Strategy
We are going to give you the top 10 advantages when you use the Quick Cash strategy. The Quick Cash strategy is especially useful for foreclosure investing. We like Quick Cash-a.k.a. flipping-because we dont like landlording (weve tried it), we love the art of the deal (flipping allows you to make lots of deals), and we like making money right away.
Number 10: No Income Tax Problems
One of the major advantages of the Quick Cash strategy is that you avoid income tax problems. When you hold rental real estate, it is very easy to recapture depreciation when you sell the property. Currently, if you have recapture of depreciation, you pay 25 percent in taxes. How easy is it to recapture depreciation? Just own rental real estate and take depreciation.
Number 9: No Extensive Record Keeping
Can you say certified public accountant (CPA)? When you own rental real estate,you must keep extensive records.You will have a full-time job as a CPA, or you will be paying a CPA.
You will have rent receipts. Security deposit receipts. Checkbooks (notice we use the plural here). You will have checking accounts to reconcile. How about the legal requirement in some areas of having a trust account for tenant security deposits?
You will keep maintenance records. You may have employees with all the paperwork and tax nightmares that entails. Workers compensation insurance, unemployment insurance, health insurance, OSHA (Occupational Safety and Hazards Association), Social Security taxes, withholding federal income taxes. The list goes on.
Number 8: No Lawsuits
If you own real property, there is a high probability that you will be sued-if not by one of your tenants or guests, then by a cutthroat attorney who looks up your real estate holdings in the public record to de-
termine if they will take a case based on the real estate assets you own that they can go after.
When you own property, you are a target for frivolous lawsuits. Some of you reading this already know exactly what we are talking about. You have been sued for no apparent reason. We also know that some of you have paid legal settlements just to make the frivolous lawsuits go away.
Our solution? Dont own real property. Not even foreclosure property. Control real property. How do you control real property and not own real property? Good question. That is what the Quick Cash strategy is all about!
Number 7: No Homeowner Association
If you are, or have ever been, part of a homeowner association, then you know the frustration of dealing with minityrants. Not to mention the $100, $200, or $300 monthly dues. Or special assessments for painting, landscaping, or roofing that can run into the thousands of dollars. And if you dont pay your monthly dues or special assessments, then your friendly homeowner association can foreclose on you and/or sue you.
Homeowner associations are no longer just attached to condominiums or townhouses. We are seeing more and more maintenance associations attached to planned unit developments (PUDs) and single-family residences (houses).
Number 6: No Repairs and Maintenance Costs
We are sure you have heard the expression deferred maintenance. Deferred maintenance is the polite way of saying a property is a fixer-upper because the property owner spent no money on regular maintenance through the years. When a property is in foreclosure, you can bet the last thing the property owner is going to spend money on is repairs and maintenance.
New roof: $7,500. New dishwasher: $400. Gardener: $100 monthly. Pool maintenance: $75 monthly. Real estate ownership entails significant repairs and maintenance costs. Flipping property helps you avoid these costs.
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