Business advice


People are still investing in real estate
December 26, 2008, 8:50 am
Filed under: Blogroll, Business Advice

Are they nuts? Have they not read the headlines that scare the rest of us away from real property for years?

Real property is not a viable option for those whose budgets can’t stretch to include investments that may be sitting for several years before bringing in a rate of return. If you have been seduced into going to a free seminar that is going to make you a gob of money, you are in the wrong place.

There are no quick answers any more. Real property investment is no longer the answer to the need to ‘get rich quick.’ If there hadn’t been so many gullible people who thought it was, we might not have the mess we do.

Ok, here is the skinny on what you can do. There are good deals to be had. But to find a deal that will be profitable eventually is going to take more homework and patience than ever. This is a new real estate market.

You need to put down enough money to make a dent in the overall value of any property. There is no more no-money down nonsense. Well, there can be, but don’t expect you will live a profitable life after going through with it.

The good deal is no longer just in the price. There are more details that have to be taken into consideration. A good deal is whether or not you make a profit or can resell when you want.

You have the cash, either from your home equity, or other sources to make a nice size down payment on a home you wish to rent out until its value reaches a level where you would consider selling. First you check out the neighborhood. What are the most recent comps? (Comps are recent sales prices in the neighborhood of similar properties.) What’s happened in the past six months? Are other properties still going down in value? Is the neighborhood dotted with foreclosed and vacant properties? If this is true, this is not going to turn out well. Even if you bought a home in such a neighborhood, and can afford to fix it up, who is going to want to either rent or buy in a neighborhood I have described.

Also, ask more than one real estate agent for comps. You want to get the big picture of what the values have looked like and how they might be looking in the next few years. If there are other for sale signs up, try and find their asking prices. How long have they been on the market? The old axiom for doing well in real estate has never changed: location, location and location.

So, you find a neighborhood you have investigated thoroughly and go ahead with the deal. You get the key and you are starting to work with your investment. What’s next? Set a time frame on how long you can carry this mortgage before you either have to rent it out or pay two mortgages yourself

Ok, I purposely wrote in this order to see if you got the point. This is the wrong way to go about it. You need to ask yourself these questions first. Not, buy and hope you can get some money back before my own finances are going to be in danger. Set a limit for what you are going to do in the way of fixing up and how much effort you are going to put into this as far as marketing. Do not depend on realtors. They are too busy holding the hands of foreclosure victims trying to work out short sales. Oh and one new caution. You are not going to rent to have those dollars pay your total mortgage. You are going to rent to subsidize your mortgage. If have a time lag between rentals, what are you going to do? Look at all aspects before jumping. A tax write-off might be the only benefit in the first few years. Can you afford it?

There is a big push to sell the public on the idea that foreclosed homes are the way to go. After all everyone wants their piece of the American dream. Ok, hold it right there buddy, advertiser, that is. That’s how we got into this mess to begin with. We want the American dream, but it has to make financial sense. I have been reading some advice about this on the Web.

Here is the nutshell. Buying foreclosures is an iffy proposition and takes a whole lot of patience. There can be liens on the homes from previous nonpayment of taxes, etc., which you might not be able to find out before you buy. There also may be repairs that you can’t see because you are not allowed to have an inspection if it’s sold at auction. If failing at auction, it will go back to a realtor. One can put in a bid, but it may be in with others. Good prices always bring too many buyers.

Why are you are interested in wanting to buy a foreclosed property? Is it going to be your primary residence or you are buying it in an attempt to flip it? Flipping houses takes longer now and may not see a rate of return for quite awhile. Foreclosure homes more than likely are going to be in a neighborhood with other foreclosures. So, set you goals before jumping in. Do you have the patience? Have you done your homework? Are you willing to put in the sweat equity and not give up if your hunt for a good value takes many months instead of the weeks you envisioned? Then if the answers are affirmative, then do your studying and map out a plan. There will be some great deals in the foreclosure market. Is this the kind of deal that is right for you? Can you afford the energy and the money?

There are other properties, all of which require the same planning, due diligence, and study before plopping down any money. Real estate investing is not for the quick of heart. It will take a good set of nerves for quite a time to come. But there are good deals out there.

For more of my work, see: http://www.bellbusinessreport.com

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1 Comment so far
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There is obviously a lot to know about this. There are some good points here. 🙂

Comment by REIT




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