A new wave of novice investors has emerged with the increase in foreclosures and bank REOs and they must keep these three tips in mind before diving head first into the business. Just because the property seems like it is a steal of a deal, they think hurry up and buy it but when in realty there is much more homework that needs to be done before hand.
First, you must understand the local market and where prices are headed along with the demand for real estate in that particular area. Due diligence is the key here. Look into the City and Government's future use plans for that area. The more you know about that market the better off you will be.
Second, purchase properties with a written business plan in effect. This is how the professionals do it, this is how you should to. Make sure you incorporate an entrance strategy as well as an exit strategy for many different scenarios.
Lastly, analyze all of the costs of ownership upfront. Everything. Not just the price you paid for it and what it is worth but how much income it will bring in, what repairs are needed, taxes, insurance, sales commissions, management costs, rental maintenance, etc. You must know everything upfront because surprises in Real Estate aren't really surprises, they are more like a blow to the head.
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