Important Real Estate Investing Tips To Keep In Mind Prior to Buying a Property

Daily I receive calls from prospective clients who are 1^st time real estate home investors looking to capitalize on a slumping real estate market.   And, for the most part, they always have the same 7 delusions about how to go about making money in the real estate game. It’s like they all were lying awake watching the same infomercial at 2 o’clock in the morning on their couches. I will discuss these “delusions” separately over the coming weeks individually as each one deserves it’s own detailed response. The end result will be to show each reader what to look for and how to go about investing differently than everyone else.  

 Delusion #1 “I want you to find me properties priced 30-40% below market value. We‘ll buy them cheap and flip them for a nice profit”

My response to this is “Well, if they are having to reduce them that low, then what we are paying IS going to be market price.” Market value is not determined by how much below the published tax assessment is, but rather what someone is willing to pay. Now, I am not saying that there aren’t deals to be had out there, just know that with the current glut of inventory on the market, a flip is not a sure-thing.  

You will be competing with the many other homes in the area that are likely priced much lower. When you factor in your transaction costs both to buy and then sell plus any taxable gain, you may find that there wasn’t as much profit in the deal as what you originally thought.

One of the best real estate investing tips I can give you today is to build intelligent plan around the concept of buy and hold. Such a plan can throw off a 20-25% positive cash flow over and above expenses (even when financed). You must know what the rental demand and area rental rates are in order to estimate your likely vacancy period of time and projected income. 

Make sure you have the right real estate investment training and the right mind set when you look for investment properties. Do not buy the property if the analysis shows to be a break even. You are in business to make money, not spend your time and resources for nothing, right?