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Remember that real estate investment is part of an overall financial plan-it shouldn't be just stocks, bonds, and mutual funds. Investing in real estate requires specific tax, spending, budgeting and people management advice. Based on your other assets and your overall financial plan, investment property might be a worthy goal, but only if it fits your investment strategy and if you’re willing to put the time and effort into creating a successful business. Many investors exclude real estate investing because they think it is too difficult. It really isn't that hard to do successfully, but you do need to educate yourself. REMEMBER-if you act like everyone else, you will end up like everyone else.
Don’t spend until you study: If you don’t have an intimate knowledge of neighborhoods, rental rates, commercial traffic or any of a dozen more factors that make real estate investments a particular success in one community and not in others, don’t even start. John Mazzara recently wrote a book entitled "Reality Based" Real Estate Investing. You can order the book and learn more at http://www.RealityBasedRealEstateInvesting.com There are many helpful tips and technique in addition to some humorous real life stories.
The most successful people in real estate investment have taken the time to learn about the properties they’re buying, sensible ways to borrow and economical ways to manage the buildings they have. Make sure you assemble a good advisory team around you starting with your financial planner, your tax adviser and an attorney knowledgeable about real estate transactions. They’ll teach you and keep you from making serious mistakes. Experience counts. Don't pick advisors who've never been involved in what you want to invest in. You will provide their education. You can visit http://www.edinamortgage.com to see some of the programs that might for you.
A slower market doesn’t mean a bargain market. Even though the gains of the past 15 years aren’t what they used to be, keep in mind many sellers aren’t terribly desperate to sell and they’re not dropping their prices all that much. Make sure you take the time to study a particular market not only for gains in price, but for stability in rent and overall quality of the property and neighborhood you’re examining. You might hear about a downtrodden neighborhood ready to “turn,” but that rotation might take years – start slow and pick properties with the best chance of appreciation. Recently, I've seen some huge opportunities within the Twin Cities marketplace. At the same time you need to be careful so you know what you're buying, especially if it was bank owned.
Unlike a pure rental property, home ownership is not a real estate investment. If you’re thinking about leapfrogging from one residence to a new one in hopes of huge gains when the market returns, give yourself a reality check. An investment is something you can sell when the moment is right without any hesitation. Is that something you can really do with a home you’ve grown comfortable in? When the market goes up or down, we don’t necessarily think of dumping our principal residence. There are emotional ties as well as physical ties to a home – whereas real estate bought as an investment must produce income during ownership or a profit at the time of sale without exception. We are making a strategic decision to sell one of our rentals at this time because we recognize that for certain reasons, the best time might be now. It is an unemotional decision. This usually isn't the case if you have a primary residence.
Real estate is not an automatic ticket out of financial trouble. In fact, you may end up in trouble. Some people have gambled their way out of debt by buying distressed properties and reselling them at a profit. They’re the lucky ones – and after hearing so much about the “flipping” phenomenon, many of those success stories might be apocryphal. Be aware of your risk tolerance at all times. Think about all the people who joined the "real estate party" late-such as condo buyers at the end of the boom in Florida, Arizona, and Nevada. Many will take huge losses. They were a victim of Greed, not careful analysis.
Enter the foreclosure market carefully. With all the reports of subprime borrowers losing their homes in recent months, don’t think those foreclosure numbers will automatically provide you with a can’t-miss opportunity in real estate. Taking advantage of the foreclosure market is both a learning exercise and an emotional one. It takes time to learn all the correct avenues in a community toward investing successfully in failed properties, and actual contact with families losing their homes can be wrenching even if you do know what you’re doing. Foreclosure and pre-foreclosure investing is not for the faint-hearted. There is a new law change regarding short sales. Basically, the sellers can sell a home and not have to recognized tax liability on their debt relief. Debt relief is the amount sold for less the outstanding loan balance.
Cash and credit lines are king. During the white-hot real estate market, people were buying and selling property for little or no money down because lenders were willing to take that risk. Today, in a higher rate environment, that’s definitely changed. While many successful real estate investors choreograph borrowing seamlessly into their strategy, cash is an important decision for down payments and covering ongoing expenses. This is where your advisory team comes in.
Keep your credit report clean: Only borrowers with the highest credit scores will find the best lending deals if they need to borrow. Make sure your credit report is clean before you enter the market. We at Venture Development will be happy to provide you with a copy of your credit report if you live in MN. There is an upfront cost to you and you will need to fill out our application and credit authorization. We are a Minnesota mortgage broker, so we ask that only Minnesota residents go to our site and fill out the loan application at http://www.ventureloanapp.com/apply.html
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