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Cashing in on the crash

By Judy Martel · Bankrate.com
Wednesday, March 28, 2012
Posted: 5 pm ET

Investors who have been avoiding real estate are getting back in, even embracing one of the tactics that got so many in trouble in the first place: flipping.

As the housing crisis drags on and foreclosed properties continue to come onto the market, investors with cash are buying the homes, fixing them up and reselling, or flipping, as it's called, for a profit. But it's not easy money. Though banks are selling foreclosures at a discount, buyers have to navigate the paperwork, withstand delays and often buy the homes sight unseen, with limited knowledge of the amount of work needed to turn them into marketable properties.

Another way investors with cash are profiting is by purchasing rental property. Vacancies are at their lowest level in six years and monthly rents are increasing as more potential homeowners decide to rent, so buying a home cheaply and collecting higher rents can bring in a profit while waiting for home prices to rise. But owners are betting on two things: that they can sell the properties later and that the rental demand will continue until then. Timing is everything. In the meantime, potential landlords will have to budget for insurance, taxes and maintenance costs.

If you can't handle the hassles of either flipping or owning investment real estate, there are always real estate investment trusts, or REITs. Those don't require you to be handy and, as an asset class, they performed well in 2011.

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