There are many different real estate investment vehicles to choose from. Many people think that owning rental properties or rehabbing homes is the only way to make money in real estate. Actually, there are more than a dozen different basic investment vehicles, and one is bound to appeal to your investment style. Whether you want to join the flipping frenzy, enter the foreclosure market, become a landlord, or play Martha Stewart and fix up a run-down house, there is an investment vehicle for you.

Some of these vehicles will result in a return in a short time, others are longer-term investments. Some will require more active participation on the investor's behalf, while others require little less than transferring money and signing documents.

Basic Tenets of Real Estate Investment
Before we tempt you with the different investments, we should remind you of a few basic tenets:

1. Real estate is not a get-rich-quick scheme. While many of us were very lucky to make a lot of money in the phenomenal 2003-2004 market, any advisor worth their salt would concede it was an incredibly unusual year. You can certainly become wealthy through real estate, but if it were as easy as some make it sound, wouldn't everyone be rich?
2. When it's calculated, higher risk investments tend to have higher returns on your investment. The key word here is risk. Investing by definition is a risk, some just happen to be a higher risk while others seem secure.
3. If you can't afford to carry a property for a period of time, don't do the transaction. Real estate investing is not child's play, and it's not for those living paycheck to paycheck. Understand that if you don't have the capital reserve to carry a flip or a rehab, you run the risk of damaging your credit or worse.
4. Question everything. NARREIA Advisors are full-time professionals as well as full-time investors, so they make it their job to be as informed as they can about their market. That said, each has their own investment style, risk tolerance, and level of conservatism. We use as much hard data as we can, but when it comes down to predicting future appreciation, market value, and cost of repairs, it's a very subjective process that relies heavily on gut instinct. When someone suggests a particular investment, obtain the data, listen to their advice, but in the end, you need to be the one who decides on how and what you invest in. Even the best will make mistakes or forget a factor, so never assume they are always right.

Real Estate Investment Vehicles
Okay, now to the meat of the subject. Below is a list of the most popular investment vehicles:

1. Rental property to hold for long term appreciation and/or a positive monthly cash flow.
2. Distressed property to rehab.
3. New construction speculative flipping (set a price before it's built, the sell it at an appreciated price soon after you take possession.)
4. Pre-Foreclosures (contacting owners who appear on a Notice of Default list)
5. Assignment of contracts (finding an undervalued property and selling it to another investor so that you never take title of the property)
6. Foreclosures (buying houses on the courthouse steps for cash)
7. REO's (Real Estate Owned - properties that no one bought at the foreclosure auction and the bank still owns)
8. Vacant Land
9. Multi-unit complexes (more than 4 units require commercial lending, usually requiring < 20% down)
10. Commercial property (This type of investment is as complex as the list above. NARREIA advisors can refer you to commercial and business brokers if you wish to participate in this type of investing.)
11. Miscellaneous (Lease Option, Contract of Sale, Land Contracts, AITDs, Private/Hard money lending, REITs)

Like the stock market, there are Bull markets (markets where prices are increasing) and Bear markets (markets where prices are flat or decreasing.) Not every investment vehicle is good in every market.

When a market is hot, houses sell fast and prices increase quickly. If a house will sell in three days, someone who hasn't been paying their mortgage for a while can sell their house quickly and avoid foreclosure by the skin of their teeth. In this kind of market, it becomes very hard to make money in foreclosures. But it is a good market to buy rentals to hold for long term appreciation. As houses rapidly appreciate, more investors are attracted to the market increasing the number of rentals available, keeping the rent at close to the same price. As the mortgages get more expensive, the pre-tax monthly cash flow picture becomes less desirable. Rentals for positive cash flow are no longer a viable option in that market.

When a market is slow and flat, however, the forces work in an opposite direction. People can't quickly sell a house, and foreclosures become more plentiful. More supply means more to go around, and the profits increase for those that buy foreclosures. Fewer investors buy rentals for appreciation, resulting in a smaller supply of rental properties. This leads to higher rents and therefore a more positive cash flow situation.

The above scenario only accounts for three of the many different investment vehicles. The point is that you can make money in almost any real estate market, but you need to understand what vehicle belongs in each market. When developing your personal investment strategy, you can pick a market and then use the vehicles conducive to that market, or decide what vehicle you would like to pursue and then determine in which market that vehicle will best perform.

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