Guide to Investing in Real Estate in MD.

When it comes to investing in Real Estate in the Maryland area you have lost of options. The most common options are 1) Flipping Real Estate, 2) Purchasing Single Unit Rentals, 3) Purchasing Multi Unit Rentals, 4) Purchasing Commercial Property, 5) Urban Development or Re Development or 6) Developing Land. This is an overview of theses common styles of investing and the positives and negatives associated with them.

1) Flipping Real Estate      When people think of flipping real estate they most commonly associate this with buying a home fixing it up and selling it for a profit. This can be done however the margins are often very low and most of the money is made based on the fact that you the investor was able to acquire the home at a very low purchase price. This means the entire investment strategy is based on being able to find a great deal and that makes this type of invest very difficult to find in many real estate markets. This is an even bigger problem because most of the time when a buyer is able to find a good deal the real estate market is soft and they will have to sell the finished product at a lower price as well.

The other method used to flip property is more sustainable through a verity of real estate markets. If you the investor are able to find a multi unit building that is in need of repair or is underutilized you can buy the property optimize the rental income and the property will sell based on the income it produces.

For Example: An investor buys 2 large row homes in need of work in Downtown Frederick, MD for $450,000 and spends an additional $300,000 on renovations to total $750,000. The investor renovates the previously empty buildings and now has 2 commercial units that rent for $1,000, 6 apartments that rent for $850 each and a 4 car garage the rents for a total of $400. Once renovated this property produces a gross income of $89,800 per year. You then deduct the estimated yearly expenses (around $9,000) and you have a net income of $80,900 per year. In a down market this type of investment property should sell at and 8% cap rate. ($80,900 / .08 = $1,011,250 in gross proceeds less the $750,000 in expenses leaves a profit of $261,250.)

This type of investment requires more cash buy is safe because it has 2 exit strategies. The sale of the renovated propertys for a fast return or long term ownership of an mixed use income producing multi unit rental property.

2) Purchasing Single Unit Rentals      Some of these styles of investing require less cash up front and less time that usually mans a lower pay off. Buying single unit rentals is one of those strategies. This is as hinds off as investing and real estate can get for the average buyer. Many buyers can buy for a little 10% down and many of these home will require little or now work. You can eve have property management company rent and look after the property for you. This will not produce a great up-front profit but provides good tax shelters and you will most likely make money in the long run of the appreciation and rent.