Afraid to Invest in Real Estate?
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Are you afraid to take the plunge and invest in real estate? Perhaps you've seen others make a fortune in real estate but you're not sure how to take the steps to ensure that you make money instead of lose money. Recent uncertainties in the market may even cause you to sit back and wait.
Making a mistake in a real estate investment decision can be costly--or even financially devastating. However, there are ways to ensure that you make money investing in real estate. The key is to learn as much as you can before you attempt to buy property. Whoever said "knowledge is power" knew what they were talking about when it comes to investing in real estate. Here are a few tips on how you can make a wise investment decision:
Stick with Proven Strategies - Single Family Homes
If you're not a gambler, it's best to stick to investing in tried-and-true single family homes. There's always a market for single family homes once you've fixed them up and are ready to resell. If you plan to rent your investment property out, single family homes are the easiest homes to rent, assuming they're not too expensive.
Prepare Your Mortgage Financing First
Get your mortgage financing arranged before you go house hunting. This essential step prepares you to make offers with a fast closing. Distressed sellers feel pressure to close as soon as possible. Quick action gives you an edge over any competition (other investors and home buyers) you might have when it comes to making offers on properties.
Educate Yourself
Become an expert in a particular area and type of home. That way, you'll eventually get good enough at knowing what homes are selling for so that you can make your offers quickly and as profitable as possible.
Know Area Employment Conditions
Watch local employment trends. You must be able to rent your investment home or sell it right away. When people have jobs, they can afford housing.
When you look for properties, either avoid altogether or be very cautious if the area's economy is largely based on just one major employer. If that employer shuts down or cuts back drastically, that entire area's real estate market will be dramatically affected and you could lose your investment capital.
One exception to that rule would be a town that is home to a large, old, and well-established college or university. Such an establishment will have a steadying effect on the community that surrounds it, and there will always be a housing need for the many employees and students who are associated with the university.
Safeguard Your Money
Always maintain a reserve fund, because unexpected things will come up as you go through the rehab process; that's just part of the investment game. If having to pay for a new roof will mean that you can't pay your own home mortgage that month, you're financially over-extended. You must make sure that an unexpected expense isn't going to jeopardize your future.
Know how much your profit potential will be before you make an offer. You should know how much the needed repairs will cost. Although we've just established that things will come up that you can't predict, you should know what the house will sell for before you make any kind of an offer. That way, you can build in a cushion that will assure you of making a profit, even when the unexpected takes place.
Plan Ahead and Act Quickly
Get through the rehab process as quickly as you can. That way, you won't be surprised if the local economy takes a downturn later on. You know what the economy and market are like at the time of purchase, and you want to be able to sell under essentially the same conditions. That will take a big load off your mind.
Educate yourself so that you feel confident instead of afraid. Remember, more multimillionaires made their money investing in real estate than by any other method.
Copyright © 2006 Jeanette J. Fisher |
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