I’ve had discussions with a few investors here recently who are looking to sink their money into something a little more lucrative then our weakening stock market. I’ve decided to write a post to inform others who may be thinking of investing here locally in the Houston area real estate market. If you are looking for good investments in the Houston area right now I would suggest investigating foreclosed properties, new construction, and/or lease option deals. I’ll tell you why I like each of these options.

1. Foreclosures/short sales are a great way to get immediate equity in a home. There are some really good deals out there, but they typically don’t last long. You have to move fast on these properties as you are typically in a bidding war, especially on the really good properties. You would definitely look for an area that is established or a subdivision a few years old that’s close to being completed. You wouldn’t be obligated to hold onto this type of property for any given time as compared to other investments I’m going to talk about, so long as the sales comparable’s equal the net profit you are looking to achieve. If you are in a established neighborhood then your only competition is the surrounding other properties as opposed o a builder in a newer community. Regardless, you want to make sure it is in a good rental area. I have a few of these areas in mind. The obvious downside is going to be the initial investment into fixing these properties up to make them rentable or sellable. Careful planning of the repairs is imperative and should coincide with the date you plan on liquidating this investment.

2. New construction are one of my favorite investments right now. Builders are pretty desperate right now to make deals happen especially now with the end of the fiscal and calendar year approaching. With an aggressive agent and patience you can typically get 10%-15% off builder inventory homes. Sometimes with some closing cost consideration. I like these right now because there is little capital investment required up front, outside of the cost of obtaining and leasing the property. There is usually zero to very little maintenance cost in the first few years of ownership. Most homes will come with a 1-2 year builder warranty. It’s easier to attract a better clientele in these types of properties because they usually command a higher rent when compared to older rental properties. The downside is that you will definitely will need to hold on to this type of property for at least 4-6 years before you can sell for top dollar and make a nice return on the sale of the property. This is to keep you from having to compete with the builder when you turn around and sell this property. These properties typically have a better chance of appreciating nicely after a few years, plus you will be able to utilize the amortization benefits. Please check out the new construction section of my website for additional information and to sign up for notification great new construction deals as we find them. Also, on our website we have a comprehensive list of local area new construction builders for you to browse.

3. Another one of my favorite types of investments right now, are lease-option investments. These are really catching on as of late. This is an excellent program considering the condition of our mortgage markets. I believe we are going to see more and more of these buyers as lenders are stiffening their credit guidelines. A lease-option investment is where there is a buyer/tenant with typically poor credit who has some cash to put down towards a home. You have to look at it a two separate transactions an actual lease and an option/purchase contract. You have your lease with all of the appropriate deposits, and you have the purchase contract that has an established purchase price for the home that you will be purchasing. With the option contract an additional deposit (typically 2-4k) is put down on the house. The buyer/tenant will sign a 2 year lease and has the right to purchase the property back from you at anytime during the 2 year lease at the price set forth in the option contract. Should they go through with the purchase then they get all of their deposits back. Should they not then they lose the option deposit and the lease deposit would be subject to the terms of the lease. Typically, the home you purchase will be a new construction builder inventory home. This is another way to capitalize on the huge discounts being offered by builders as you will turn around and sell the home back to the tenant at top dollar typically making @ 20-25k on the sale of the home, in only two years or less, with a minimal capital investment. There are a ton of advantages and minimal disadvantages. Contact me so I can send you a complete explanation and example of how this program works.

With the weakening stock market and banks freezing credit, you will not find a better time to set yourself up in the lucrative residential real estate investment market. Just visualize the amount of people who will be turned down for credit this year. These people will be turning into tenants, because they will have nowhere else to go. Don’t sit around and “hurry up and wait” for your stocks to recover. Set yourself up to prosper in this down market, increase your net worth, and invest your capital in Houston’s residential real estate market.

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