Five Real Estate Investing Strategies that Outperform "Fix and Flip" in Today's Market

You've read the new stories. Record numbers of houses are sitting on the market unsold. Prices have sagged. New housing starts in October 2006 fell 17.9 percent behind October 2005. And to make the situation worse, interest rates are high enough to scare away buyers.

When you add up all those factors, it becomes clear that this is no time to expect to sell properties quickly for top dollar. That, in short, is why it's time to set aside the "fix and flip" approach for  real estate investing until the current market turns around.

But some strategies allow you to not only outperform the current soft market, but turn its downside to your advantage. Here's how to take advantage of them.

• Strategy One: Buy, fix and hold. To put this plan to work for you, buy properties at their current deflated value, fix them up (without overspending), rent them out until the market strengthens, then sell them for a good profit. This approach can also be applied to properties you already own. That allows you to generate rental income from properties that you will sell later on when the market turns around.
• Strategy Two: Become active in slump-resistant locales. There are more out there than many investors expect. For example, you can still make money building or renovating houses in upscale commuter towns near most major cities. Or you can collect substantial rental income from properties near college campuses or near hospitals where interns and members of the hospital staff need apartments. This focused approach outperforms the standard real estate advice that tells you that a certain state or city is "hot" or "cold," because you are targeting "hot pockets" that are highly slump-resistant.
• Strategy Three: Get more aggressive about buying available properties. You can become involved with real estate investing with soon-to-be-foreclosed, or foreclosed properties. And there are other approaches, too, such as asking local realtors to help you identify sellers who are willing to offer you owner financing, cover your closing costs or offer other incentives.
• Strategy Four: Offer rent-to-buy options for properties you would like to sell. Rent out your properties and offer your tenants an option to rent to buy. (A portion of the rent they pay each month is applied toward their down payment when they buy the house at a pre-determined time.) The tenants benefit from buying your property without paying a large down payment. You benefit by locking in your asking price and by getting motivated tenants who are less likely than most to break leases or abuse your property. Discuss this option with your attorney. 
• Strategy Five: Target niche buyers. One successful developer tells me that she is making great money in the current market by acquiring inner-city single and multi-family houses, fixing them up and selling them. ("Many people who live in inner cities are honest, hardworking citizens who are eager to own property," she states.) And a real estate agent who specializes in ultra-luxury condos tells me that the current slump hasn't put the slightest crimp in the finances of her many ultra-rich clients.

You can mix and match those strategies too. For example, you can buy a house from distressed sellers before it is foreclosed - and then lease it back to them. The sellers get needed cash and you get a property at a rock-bottom price.

So are there ways to keep profits strong in the current destabilized market? Absolutely. Just be sure your number-crunching and other skills are keen enough to help you recognize opportunities and avoid deals that are too risky. You can learn what you need to know, quickly, in Trump University's Real Estate Investors Training Program.

Michael Sexton is President of Trump University.