Inform Yourself before Investing in Real Estate

April 5, 2009 by  
Filed under Real Estate Investing

With the latest reality craze in television shows, it’s easy to find a rich and famous star that made a fortune in the real estate business. True, for an informed and seasoned investor, this type of venture is quite easy. However, with a first-time experience, there are several things to be aware of before jumping in head-first.

There is a very steep learning curve when investing in real estate. Though this means that you learn a vast amount of knowledge with each and every property, it also translates to potentially losing a great deal of money in the process. Any investment that leaves you broke is not a good one!

This is why it’s so important to never get so excited that you move too quickly; do your homework, ask questions, and wait. There will always be another deal to be had, so don’t get in a hurry. Wait until that property drops in price even more to play it safe – if it sells in the meantime, walk away and look for another.

Also consider what type of results you want from investing in real estate. Is this to become part of your retirement fund, or do you want it to become a full-time job and business? What type of money do you want to make? Make sure these goals and your expectations are always realistic.

Remember that when the housing market drops, it is usually quite drastic. This possibility may leave you hanging on to properties longer than once thought to wait for the next upturn. Be sure you can handle this fluctuation before jumping in!

After setting your real estate goals, outline your course of action for the next one to five years. This business plan should always be reviewed at least every six months, and will need to be revised frequently; however, it still serves a useful purpose of keeping you on track to your end goals.

When writing your business plan, consider your immediate capital available, and what type of financing you may qualify for. Perhaps you have enough equity in your primary residence to find a second home equity loan, but be careful – if you are ever in trouble and are at risk of losing one, make sure it’s not the one you live in!

Remember that as stressful as investing in real estate can become, there are great rewards. After buying and renting or reselling your first property or two, you’ll have a great idea of what mishaps can be avoided in the future, resulting in more money in your pocket.

Your negotiation skills will also improve, and this coupled with a growing rapport with contractors, agents and lenders can result in lower charges and rates in the future. Once you have developed a trusted network of real estate professionals, you’ll be able to hit the ground running.

It is very possible you may discover that investing in real estate is not for you. If you do not trust the process or don’t have any desire to have a hands-on experience with your investments, then choosing another vehicle to grow your money is probably best.

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