Avoid Limiting Your Buying and Selling Options. There are hundreds of ways to purchase Properties. Your Exit Strategy Depends on HOW You Purchase it

[Kevin Hamblin]

Be Careful of the advice you get from people on BP. There are hundreds of ways to purchase and sell a home.

If you are buying the home to live in. That opens up a lot more opportunities than if you are purchasing it for an investment.

When you are purchasing a home for an investment and even to live in for that matter, it is ALL about the numbers and the terms.

If you are going to live in the property, you can get better terms, Interest rates, less money down etc because it is owner occupied. FHA, Conventional, or VA(if you are a veteran), typically have better rates and you can do as low as 3% or less down if you are a first time home buyer. These loans can be harder to get because they have stricter requirements, but having a co-signor is a great idea.

I disagree with what some people say:  "that lease to own is a horrible way to buy", I bought my first home on a lease to own and then got financing after 3 months and made over $80,000 when I sold it 3 times on lease option. The thing to keep in mind about Lease to Own is that if you are buying from an investor, odds are that the deal is in their favor, do your home work to make sure you are getting a great deal.

If you find someone that is a motivated seller, lease to own might be a good way to buy because they just want someone to make the payment. You are not a true owner on a lease to purchase until you get title. So you are still a renter. This can be a lucrative way to buy real estate and flip it to someone else on a Sub-Lease to Own and make money on the spread.

In the case of a motivated seller, it is better to do a Owner Carry or Subject To. You then have true title (ownership) and using OPM (other people's money).

You can start a business and get a Business Line of Credit combined with Subject to or Hard Money loan with a 3 or 5 year fixed to give you time to build your personal credit. Hard Money Loans Typically have higher interest rates from 8.49% to over 16% and loan origination of 1 to 5 points. Again This is a great idea for investment properties or short term to get you into a home and then refinance in a couple of years. Remember it is ALL about the numbers and the terms.

How you buy the house will determine your exit strategy of when and how you sell the property.

If you purchase the house using your credit and with the intent on living in it, then you can sell it any way you feel comfortable and make the maximum amount of profit. If you do a high interest rate hard money loan that has a 12 month balloon you are limited to selling it within 12 months (flipping it) or refinancing it with a longer term loan(Buy and Hold).

If you do a business line of credit and Hard money loan to get 100% financing and the hard money loan is for 3 or 5 years, then you can do a short term buy and hold, sell it on lease option, for 1-2 years and you get higher rents (more cash flow), you get appreciation, You get the interest tax write off, you get larger down payment 10-15% of the future value of the house, you get the pay down of the loan, you get back end profit from the house if you buy below current market value, and you get to depreciate the house on taxes as well. 5 streams of income. 

If you do an "owner carry sell" then you get all the above streams of income except the depreciation. You still get to write off the interest you are paying on your loan but the new owner gets to write off the interest they are paying you.

So your exit strategy is determined on how you purchase the house. As a new investor please do not get into the mind set that you only have to fix and flip, or just whole sale, or just buy and hold because you miss out on many other ways to make money as an investor.

Hope this helps,

Kevin