Are You Investing In Real Estate Right Now?

I think that this recession has presented a golden opportunity for real estate investors. There were many millionaires created during the recession in the early 80's and I believe there will be many more created in this one. Now, I'm not saying it is right for everyone or that this is something YOU should pursue but, I am saying that in certain cases it can be a goldmine.

There are several things you need to consider first:

1. Do you know your local market - If you are an agent but not very well-versed in investment property hire an agent who is or learn what you need to know BEFORE buying. Pickup a copy of The Millionaire Real Estate Investor and read through it two or three times BEFORE BUYING.
2. Do you want to buy and hold or fix and flip - Personally I would hold off if you are a 'flipper. The resale market in many areas is soft and if you are wrong on renovation cost it could kill you when you try to get out. If you want to buy and hold then you are looking at rental property (I'm not going to consider raw land appreciation because IMHO that is speculation, not investing).
   
3. Learn about investing- I know this is really pint one again but it is that important. You need to learn about local rental rates, laws that apply to being a landlord, how to structure a lease, what you can and can't say when screening tenants, etc.. I also would advise that for the first two or three properties that you purchase that you DO NOT hire a management company. Do it yourself so you are familiar with what the management company does for you and why they really earn their fee. You DID NOTICE that I said you first two or three, right! You will never get rich with just a few properties. My personal goal is 500 units in 3 or 4 large apartment buildings.
4. Can you get financing and do you have deep pockets if the market doesn't come back right way - I would advise that you buy with a significant down payment of 15 - 20%. If you don't have it then wait until you do. ****DO NOT BUY AND EXPECT APPRECIATION RIGHT AWAY**** Okay did you get that. If not go back and read it again. No really, I'll wait........OK, got it. This is about cash flow. Buy it right, below market with an equity investment, and make sure it generates cash flow from day one. You need the deep pockets in case you read the market wrong and rents get push downward and your at a loss or you DIDN'T LISTEN TO ME AND BOUGHT IT EXPECTING APPRECIATION!
5. Realize that with rental property people do move out and you will have vacancies from time to time. Now Robert Kiyosaki the author of Rich Dad, Poor Dad (pickup a copy and read it also) advises buying single family homes for your first purchase. I dont'. I think 2, 3, or 4-plexes are better. If a single family home is vacant it is 100% vacant. If you lose one tenant in the multi-unit it is only a percentage of the total and you have at least some cash flow. Ultimately it is your decision but my preference would be for multi-family.

This list is by no means exhaustive but it some things to consider if you are going to invest in Real Estate. I would do a part 2 on the benefits of investing later.

*For full disclosure if you click on the links to the books mentioned and purchase them from Amazon I make a few cents off the purchase. I recommend these book because I have read them and believe in what that say not because a make $0.20 or $0.30 from your purchase.