From about the mid-1990s up until the housing bubble burst, Arizona's economy was basically driven primarily by the real estate industry. During those decades, high population growth and lax credit standards took a booming housing market. This boom created a fact that more real estate-related jobs (real estate agents, construction providers, title/escrow agents, etc). This also became an attractive market pertaining to property investment companies. These investors flooded the market selecting up property left and right. This ultimately took inflated home prices, which played a big role from the bust that started in late 2006.
Fast forward for you to today... It is late 2010 and over the past 4 numerous years the effects of the housing collapse are evident. The market seems to have definitely changed, but those real estate investors (who usually are not shell shocked) are seeing great opportunity. It is moments to shift the mind set of the investor. Investing no longer are generally based solely on speculation. An investment opportunity must have to produce cash flow, which provides a monthly passive income for those investor. There are other advantages; however this article will concentration on the impact property investment companies have on the monetary investor.
The first step is to understand the different types of property funding companies. There are 3 main categories; property wholesalers, rehabilitate specialists, and private equity funds. It is important to understand the particular services these companies provide and how they impact a profits investor's profitability.
Property Investment Companies: Property Wholesalers
Using the increasing supply of distressed real estate, there have been a number of property from suppliers companies entering the Arizona market. These property expenditure of money companies purchase property at a discount, then wholesale (or flip) the properties to an investor at a higher rate. Typically, wholesale companies are purchasing short sales, bank-owned (REO) properties, or properties at trustee sales. Anyplace they can buy at the lowest possible price and resale for the highest possible profit. Generally, the properties being sold through wholesale companies are 'as is'. This means that they will not possibly be doing any improvements to the property, which could be a setback for the buyer.
Impact on a cash flow investor: There can be positives and negatives to working with a property wholesale company. Some of the advantages could quite possibly include acquiring a property at a price below market worth, since many companies try to purchase at 50 or 70 cents on the dollar and sell for 80 mere cents. Also, property wholesalers are typically dealing with properties under $150, 000, so cash flow investors are investing a smaller amount of cash with the potential for higher returns. A disadvantage to employing a property wholesaler is not knowing exactly what you are getting, through terms a property's condition. As mentioned earlier, the real estate are generally sold 'as is'. This could mean more growth capital is needed over and above the acquisition cost. Without having a quality calculate of that additional cost, it could definitely impact the cash stream investor's return.
Property Investment Companies: Rehab Specialists
Rehabilitation specialists, more commonly known as fix and flippers, are place investment companies that purchase property with the intent to extend and sell for a profit. As with property wholesalers, typically the Arizona real estate market has seen an increase in rehab gurus. The distressed property environment is fueling this development. Companies are able to purchase property at a discount, rehab, plus sell to buyers looking for a move-in ready home. It is very important review the quality of the rehab work, as there are bad and the good rehab specialists. If the work is not done well, therefore more problems can arise for the property buyer.
Effect on a cash flow investor: There are several advantages to using a rehab specialist; however there are also some disadvantages. A big advantage will be that a rehab specialist can provide a cash flow investor along with a turnkey investment property that is ready for a tenant as well as the potential of quickly generating monthly income. All these properties may require a bit more capital at acquisition and costed a bit closer to the actual market value; however shouldn't experience additional rehab costs. One disadvantage is if the rehabilitation specialist did not do quality work, which could require extra expense to maintain the property. It is important to always ask for references. An honest rehab specialist will have a portfolio of completed ventures they can provide to investors.
Property Investment Companies: Secret Equity Funds
Private equity funds are quite a bit different from the other 2 types of property investment companies. They develop capital from many investors with the goal of buying property and returning a monthly cash flow over a place period of time. A private equity fund is approved and governed by the Security and Exchange Commission (SEC) and every person fund sets its own investment terms. They vary dependant on property acquisition, return percentage, and length of the investment decision. The fund is controlled by a group of fund administrators, typically the principals of the company issuing the fund, without having to by the individual investors. There have been some past challenges through private equity funds stemming from misuse of dollars, improper capital allocation, and poor asset management.
Affect a cash flow investor: Private equity funds can offer added benefits to cash flow investors who are only concerned with the gain and do not want to deal with acquiring the property. There is typically the minimum capital investment with these funds; however in most cases it will be cheaper than purchasing an actual property. With a collaboration regarding capital, a fund has the ability to purchase larger pieces of realty with the potential for higher returns and develop a larger account of property providing diversification to the investment. There are also numerous disadvantages to private equity funds. A cash flow real estate investor would have no control of how the fund is supervised or what type of property the fund is acquiring. The investor will get a prospectus that outlines the terms of your fund. Also, it is important to research the principals involved as well as make sure the fund has filed the appropriate SEC papers.
Property investment companies provide many great services just for cash flow investors. It is important to find the right company that fits on with your investment strategy and how their services will be able to increase your profitability. Clear Vision Investment Group is actually a resource for cash flow investors. Get our recommendations on what forms of property investment companies are right for you. Also, master how Clear Vision Investment Group can help you find profitable cash opportunities.