Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. In this blog, we'll go beyond buying a home and introduce you to real estate as an investment. 

Basic Rental Properties summary

This is an investment as old as the practice of landownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage (according to the U.S. Census Bureau, real estate has consistently increased in value since 1940), leaving the landlord with a more valuable asset.

Perhaps the biggest difference between a rental property and other investments is the amount time and work you have to devote to maintaining your investment. When you buy a stock, it simply sits in your brokerage account and (hopefully) increases in value. If you invest in a rental property, there are many responsibilities that come along with being a landlord. When the furnace stops working in the middle of the night, it's you who gets the phone call. If you don't mind handyman work, this may not bother you; otherwise, a professional property manager would be glad to take the problem off your hands - for a price, of course!

There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. There is also the matter of finding the right property - you will want to pick an area where vacancy rates are low (due to demand) and choose a place that people will want to rent.

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As the market starts to show signs of a rebound, investing in real property also becomes a more appealing idea -- either as a career or a great side job. Like any other endeavor, though, there's a right way and a wrong way to go about it.

Mistakes that can COST you!

 1. Planning as you go.

Don't buy a house because you think they got a good deal and then try to figure out what to do with it. That's working backward, "First, you find the plan, "Then you find the house to fit the plan. Pick your investment model, and then go find property to match that. Don't find the strategy after you find the home."

The problem is that most people look at real estate as a transaction instead of as an investment strategy. "People fall in love with a property,"  My advice, 'Who cares about the property?' I fall in love with a motivated seller."

The number is the number, and you don't go above that, he says. The best way to solve the problem is to have lots of activity and make offers on multiple properties. Then you don't care which one you get -- as long as the numbers work out in your favor.

2.Thinking you'll "get rich quick." That kind of wrong-headed thinking is fueled by "these self-appointed gurus who have infomercials and make it sound so easy to get rich in real estate,"It's not easy. It's a good long-term investment, but so is putting your money in a mutual fund, which is a lot easier. "These gurus don't talk about all that hard work. You have to be smart, you have to be willing to work, and you have to understand your risk tolerance."

3. Acknowledge your limits - let the experts be experts.  A key to success is building the right team of professionals. At the very least, you need good relationships with at least one real estate agent, an appraiser, a home inspector, a closing attorney and a lender, both for your own deals and to assist with financing for prospective buyers. In the remodeling and maintenance segment of the business, the team includes a plumber, an electrician, a roofer, a painter, a heating and air conditioning, or HVAC, contractor, a flooring installer, a lawn maintenance service, a cleaning service and an all-around handyman. You can't build a business as an investor if you're spending all your time fixing leaky faucets and putting up ceiling fans.

4. Paying too much.    The biggest reason investors don't make money is simple: They pay too much for the properties. "The profit is locked in immediately once the investor buys the property. "Due to mistakes in the analysis, the investor pays too much and then is surprised later when he doesn't make any money." 

5. Skipping homework. You wouldn't think you're qualified to perform open-heart surgery without years of education and training. Yet many wannabe real estate investors don't think twice about taking their financial lives in their hands without even cracking a book. Educate yourself before you put your family's financial security on the line. Read articles, check out books from the library and look for a local chapter of the National Real Estate Investors Association. Speakers at monthly meetings cover everything from buying foreclosures to screening tenants. If you can't find a local chapter, find out who owns a lot of rental properties in the area, call him up and offer to pay for an hour or two of his time to find out whether this is a good career for you.

6. Ducking due diligence. Investors often have to move very quickly on their deals. That doesn't mean they sign a contract and write a check without plenty of research, though. That's where a lot of newbies trip up.   They don't do their due diligence about the deal, the costs or the market conditions, and they wind up draining their personal savings because the house needs extensive repairs or they can't sell it. "Sometimes, new investors are buying property just based on the idea that the property is going to appreciate. "Usually, they don't have any information to substantiate that."

7. Misjudging cash flow. If your strategy is to buy, hold and rent out properties, you need sufficient cash flow to cover maintenance. "People think they can get a property manager,"  But many have never interviewed a property manager and have little idea about how they work. Most managers, for example, are reluctant to take on one single-family home or a duplex, preferring larger complexes, and fees of 7 percent to 10 percent of the monthly rent are common. It can be a huge expense.

8. Lowering the volume.If you're working on one deal at a time, you're doing transactions, not running a business. You need a steady pipeline of prospective deals; sufficient volume will weed out the marginal deals and let the good ones rise to the top.

9. Painting yourself into a corner. Many people buy a property and get stuck with it because they only have one exit strategy. They're going to sell it or they're going to rent it out. What if it doesn't sell? What if the rental market stalls? Always have two, if not three, ways to get out of any deal. For example, if plan A is to rehab the house, put it on the market and resell it, then plan B could be to offer a lease-purchase to a buyer. Plan C might be to hold the house and rent it out. And as a plan D, there is the wholesale option, which would involve selling to another investor at a below-market price. Hopefully, you'll still make a profit, but at the very least, you'll cut the losses you're taking every month in carrying costs.

10. Miscalculating estimates. A GOOD RULE OF THUMB FOR new rehabbers is that after you've done the homework, you should double the amount of time and money you think it will take. If you can still make money then  it's a good deal!!!!