So you are considering investing in real estate. Many smart people, not just the Trumps, have become very wealthy in doing so.
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”
-Franklin D. Roosevelt
However, you must decide why you want to invest in Real Estate & what your goals for your investment are before you proceed. By deciding why you are investing right up front, it will help guide your education and your decision making.
- Are you interested in monthly "cash flow"?
- Are you looking for a big pay day after a few months? A few years?
- Are you looking to build an asset base that creates passive income for you while you're sipping cold drinks on the beach?
- Are you looking for "hands off" investing or "active" investing?
The first step in real estate investing is to educate yourself. Talk with others who are successful in their investments & ask them questions & lots of them. Not sure what to ask? Start with, where did they start? How much capital did they start with? What mistakes have they learned from? What tips can they offer? Where have they been most successful?
There is a huge difference in Real Estate "Flipping"or "Rehabbing" and "Investing". Flipping a house (or Rehabbing a house) like you see on the many TV shows looks exciting, but there are more than a few dangers to this approach.
Part #1 “Flipping”
To "flip" a house you typically need to buy it well below market value. This can be extremely difficult to do consistently. Trying to find a property that you can lock up substantially below market value will take a great deal of effort.* Then you need to know what all the costs will be to fix the property, the carrying costs you will assume until it sells, the lawyer fees, deed transfer tax, real estate commissions & the market value of the property once you are finished. Once you have calculated all of these, add an additional 15-20% for unknowns that may arise. Now that you have your total, is there room for profit? Keep in mind too that statistics for the Halifax Regional municipality so far this year show that the average time to sell a property from time of listing to accepted offer is 92 days plus an average of 6 weeks to actual closing. Another factor to consider is that only 42% of listings are actually selling. These are not the best odds for jumping into the fix & flip market. A couple of years ago, when we were experiencing a seller’s market, it was ideal. We had a short inventory of listings & a lot of buyers getting into the market. Today, we are experiencing a buyer’s market. There are lots of listings to choose from & buyers are not feeling the pressure to buy the first thing they see that they like. They are willing to wait & see what will be coming on the market tomorrow.
Real estate is a "local" game. Anyone who believes the media headlines as to whether the entire real estate market is UP or DOWN is a rookie. There are areas of the country where real estate is appreciating in a "perceived" down market. And there are areas where real estate can be losing value, while the majority of the market is increasing in value.* Don’t kid yourself either into thinking that the “local market” can’t vary from neighborhood to neighborhood within a town/city.
Another important factor in real estate investing is to surround yourself with a reliable, trustworthy network of trades including but not limited to:
1. a real estate agent to help you find a suitable property; negotiated the purchase of; provide you with comparable market information on the property before the renovations& after; to help you make sound decisions on where best to spend your money on the flip to regain the most money after the sale; to market the property for you & help you during negotiations on the sale of the property as well.
2. A real estate lawyer
3. City planning & zoning
4. Contractors in various fields
5. An accountant to make sure you are well informed, prepared & protected at tax time.
*http://www.therealestaterenegades.com
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