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Cash for today or wealth for tomorrow? That is a great question that investors must continue to ask themselves. In today’s real estate market we are experiencing the greatest transfer of wealth of our generation. The sub-prime mortgage crash has created an unlimited amount of distressed properties that can be purchased at big discounts. The buying opportunities today can provide great investment opportunities for the investor. With the ability to buy real estate far below value the investor will have the opportunity for large equity gains on the acquisitions made. With the equity gains the investor must determine the proper exit strategy to capitalize on this market.

Once the acquisition has been made the investor has the opportunity to fix up and then re-sell the property at a great profit. Today’s distress properties have revitalized the potential to fix and flip houses in 2009. The primary difference in today’s opportunity is that this can be done in nicer neighborhoods than in the previous height of the market of 2006 – 2007. This is due to the high inventory of distress properties now available. One other major impacting factor is the market created for first time home buyers looking to take the $8,000 tax credit from our government. This is a huge incentive that has created a lot of new buyers this year.

A typical fix and flip in our market in Richmond, VA will look like this: Purchase price: $90k Repairs to house: $20k Re-sell house: $150k Flip profit: $40k You may be asking yourself why you would ever consider not selling a house today for a $40k profit. These types of deals can be acquired on a regular basis if you are active in the market and making offers continually as we are. My wife Cheryl and I have active discussions on exit strategy when we make these types of acquisitions. Cheryl really does not want to re-sell all these houses for the fast profit in 2009. She would prefer to hold onto them as rentals for the next several years. Why would she want to do that? Many of us believe that our government spending is vastly out of control with bailouts, cash for clunkers, heath care, etc. This spending will potentially follow with a run up in inflation, potentially hyper-inflation.

What if you hold onto these properties rather than selling them all for a profit today? While experiencing the greatest transfer of wealth of our generation you can collect income producing assets that will provide you with a nice rental income stream. You will enjoy watching your net worth skyrocket and begin to enjoy steady income from your rents. If you are fortunate enough to own a collection of properties and we do experience any level of inflation you will enjoy watching the appreciation multiply your net worth faster than you thought possible. So should you enjoy cash for today or wealth for tomorrow? Only you can answer that question.

It may depend on your current situation regarding to personal debt, income, planning and ability to fund the deals. I encourage you to build a simple plan and consider a mixed-exit strategy where you sell some for income today and hold the others for wealth tomorrow.

From acquiring, to investing, to repairing, to staging, to appraising, to inspecting, to putting it on the market, to open houses, to listing, to contracts, to actually selling… the process of investing in and selling a home from start to finish can be confusing and a daunting task. We want to make it easy! We are working with a new home that a private lender has invested his money in to yield a great percentage. We are the experts in the field of home acquisition and investments. This particular home has just been acquired and is in the process of getting repairs and getting ready to go on the market… SO we have decided to do a series of blog entries following this home and it’s investors from the beginning to the day it sells.

I continue to get a lot of questions on this investing now blog series via email, etc.  In the last post we highlighted what each person involved in this investment received.   Investing is all about who gets what.  A Seller may get debt relief, a Buyer may get a great house to raise their family in, an investor may get tremendous equity and rental income.  While making your investments it is very important to determine what each of the people involved in the transaction are seeking and what you can offer them to meet their needs.  Some may need the highest price, some may need a super fast closing, others may need to sell the house as-is.  Some buyers want a fixer upper, some want a house move-in ready and others are looking for just a great deal.  For private lenders, some may want a safe conservative interest rate such as 7% and yet others may want a piece of the action in the form of an equity position in your deal. One key to sucess is to determine what each player in the transaction needs and then engineer a solution that meets everyones needs, including your own.

Several people have asked what happened to the house featured in this investing now blog series.  It has been sold in a rather unique situation.  We ended up receiving an offer one morning which looked pretty good.  Before we signed the contract that day we received a second offer on this property.  The second offer was an all cash-offer with no financing contingencies, etc.  The best part of any cash offer is the super fast closing.  In this case they offered to close in one week so we took the offer on this house.  The unique part of the sale was the story behind the sale.  It was an all cash offer because parents were buying it for kids who are getting married…  Yes, this house became someones wedding gift!

Always remember to make your real estate transactions a win-win scenario so that the Seller, Buyer, private lender and yourself all can win and achieve their goals!

Jim Ingersoll

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