Thinking of Investing in Real Estate?
Posted by Lee Cameron on Wednesday, October 14th, 2009 at 12:42pm.There are two basic ways of investing in real estate - short term and long term. One of the most beautiful things about real estate is that the value is virtually guaranteed to always go up. Even with the huge hit that our economy took in the last couple years, if you average out the numbers you'd see that home values have continued to climb at a fairly steady rate since...well...since anyone started keeping track. That means that if you're willing to hold onto a property for the long-term, it is nearly guaranteed to be a good investment for you. Think about how much homes cost twenty years ago and how much one of those properties could sell for now.
Then there is short-term investing. A few years ago, short term real estate investing was a very lucrative pursuit for many people. They would do what is called "house flipping", where they would buy distressed properties, fix them up a little bit, and then sell them again for a tidy profit. It was a bit risky but for a while it worked out wonderfully, until, of course, the market collapsed and they found that they were lucky to sell their properties at all, much less make a profit on them. But now, with the market creeping its way back up and an inventory filled with distressed properties, many investors are looking to get into the game again.
So if you are considering getting into the house-flipping game, please be smart about it. Here are some tips:
1. Do Not Underestimate the Cost
House flipping is not cheap or easy, and it isn't guaranteed. Make sure that you have the capital up front to pull it off without too much personal risk. Try to make sure that you can pay for the home in cash, and remember that buying the home is not the only cost that you will have to incur. There will also likely be repairs and maintenance that needs to be done on the property before it can be sold again. Factor all these costs in before you determine whether you can afford the investment.
2. Know What You're Buying
Do not just go through a neighborhood looking for "For Sale" signs, and especially do not just buy a property you've only seen on the internet. Make sure that you know what kind of house you're getting, what kind of shape it is in, and what kinds of repairs and improvements you may need to make. Learn how to spot structural defects, or problems with wiring and plumbing yourself to save on time and help make finding the right property easier.
3. Learn How to Read the Market
Don't keep yourself in a bubble. No matter how good a shape the house is in, it's the market that will determine whether you will sell it and how much profit you'll make. Pay attention to the market.
4. If Necessary, Know How to Adapt
Though currently on the rise, the market is still on pretty shaky ground and could change again at any time. Make sure that you have a "plan B" in case things go south. Remember that an investment property can always be leased out if you need to wait for the market to pick back up.
5. Know the Risks
If there's one thing the last few years should have taught us, it's that there's no such thing as a sure thing. Know what you're getting into before you get into it. Just like with any gamble, the smart thing to do is only play to win when you can afford to lose.
If you have any questions about investing in real estate, or if there's anything else I can help you with, don't hesitate to contact me. You can also call 407-421-1052 or email me directly.
-Lee
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