See the exit door before entering!

Statistics show that real estate investors are profiting an estimated $30,000 per house that they invest in. Investors buy the house at deeply discounted prices, fix them and then flip them for a generous profit. Sounds exciting indeed! 3% of Americans now call themselves real estate investors. A lot of others are also enthusiastic to enter this alluring trade.

Novice real estate investors often give in to the glamour of Philadelphia investment real estate and then falter. For, novice investors fail to design an exit strategy before making the deal. You essentially need to know your way out before you enter.

The two popular exit strategies in foreclosed property investment are:

• Flipping the property
• Hold the property, rent it out and then sell it when the market trend moves upwards.

Flipping the property: Flipping refers to the act of buying the property, repairing it and then selling it to another buyer for a reasonable profit.

When you invest in a property to flip it over for quick money, it is essential to estimate the repairs cost, sale value and so forth before purchasing the property.

For instance: If a property’s after repair value is estimated at $125,000 and it now available at $80,000, a simple profit calculation of $45,000 is not it. You need to estimate the repairs cost and add it to your purchase value. Let’s say you estimate the repairs cost as $15,000, then it is a profitable deal. Within a span of 3-4 months, you can make a profit of $30,000 by flipping. However, remember to inspect the property or get it inspected by a professional Philadelphia real estate wholesaler to make the right estimation. For, an incorrect estimation might lead to increased costs and reduced profits.

Furthermore, you also need to assess if the market is a buyer’s market or not. If the neighborhood in which the property is located enjoys a rental market, then you may not be able to flip it over.

Holding the property and then selling it later: Many investors prefer to hold the rehabilitated property and rent it out to a prospective tenant. This provides a fixed monthly income, and a strong equity. However, if your goal is to rent the property, you need to understand what the tenants in the neighborhood are looking for. If the other houses have a backyard, upgraded cabinet and counter tops or hardwood floors, then you need to do the same. Once again, all these features need to be in tune with your exit strategy. It is essential for you to conduct a market research and understand if the area in question has a rental market.

In case you rehab the house as per your choice, you may end up with a vacant property. Therefore, it is essential for you to design your exit strategy based on your goals and expectations before purchasing the property. As a novice, a smarter solution is to employ the services of a Philadelphia real estate wholesaler, who will assist you with your exit strategy. This enables you to avoid unlikely setbacks.

The author, Robert Wills is attached with New Western Acquisitions, a real estate firm who specialized in real estate investment properties,houses and real estate wholesaler.