Looking for a fairly safe, guaranteed investment vehicle? Have you ever considered putting your money in real estate? Becoming a real estate devotee can be one of the safest, most profitable decisions you ever make.
It’s fairly common to hear of people losing tons of cash in the stock market.
It is fairly rare, though, to hear of a real estate investor going bankrupt. The simple truth is that despite the headlines you may see in the morning paper, real estate, as a market, cannot suffer a serious crash without seeing the rest of the financial world crash around it too. Let’s say, for example, that you choose to invest in a fifty thousand dollar home. Unless something catastrophic happens, and the United States as a whole financially collapses resulting in twenty-five thousand dollar automobiles selling for a hundred dollars and sliced bread selling for pennies, your investment isn’t going to suddenly start selling for five thousand dollars. It is important to keep in mind, though, that market hot spots can, and do change at will with the world around them. While Salt Lake City may be the market hot spot in six months, in ten months, Seattle may be the new hot spot. And while a switch like that may have you losing a bit of money on some deals you probably shouldn’t have brokered in the first place, you certainly won’t lose the investment as a whole.
There are a few strategies you can implement to make real estate an even safer market for you to invest in. First, try not to invest in areas that are reliant upon one factor. For example, let’s say you invest in an area where all of the homeowners are employed by the local oatmeal factory. The factory has been there for years. Six months after you make your investment, the factory begins to lay off workers. Six months after that, the factory shuts down and moves its business across the border. Suddenly, your investment is not worth quite as much. Invest only in diverse areas, and you will be more likely to turn in a profit. Second, many investors employ the strategy of purchasing a property and holding onto it until it becomes valuable enough to sell. In general, this just isn’t the way a business should be run. Homes and markets are volatile places, and if you choose to simply hang onto your investments, you could lose all of your money very quickly. Finally, be sure that you understand the ups and downs of the real estate market as a whole. Simply throwing some money into the ring and watching to see if it grows is not the best option for an investor. Do your research, and talk to the applicable financial professionals for help when you need it most. Become aware of your surroundings and you will be a safer investor.
Once you’ve made the decision to start investing in real estate, there are several things you need to know as you begin the process. One of the first things you should do is create a team of support professionals around you to help you out with the first real estate deal you make. Your team should consist of a real estate lawyer who has actually been an investor in recent years, a title company who deals with investors on a regular basis, an insurance agent who knows the ins and outs of real estate investments, a mortgage broker you know and trust, and an accountant who is familiar with the tax laws involved with investing in real estate.
When you have your team in place, it’s time to take your next big step, finding the right property to meet your needs. Most professionals suggest that you start with something like a single-family dwelling. Not only are there more buyers for this type of property in the real estate market, but brokers are also more willing to lend more cash to you on this type of property. If you think you have found the perfect property to meet your needs, there are a few ways to decide if you are getting the best possible deal. First, decide what the property is truly worth by looking at comparable sales in the area. From there, think about the kind of work the property will need, and how much that work might cost you in the long run. Try to negotiate a price that is at least twenty percent below the market value of the home. If you intend to lease the property, make sure the cash flow from the home will cover all of your costs and generate a profit. Keep in mind that you may not have as much time to delve into a complete analysis of the property as you would like. So if you are interested in a properly, move as quickly and prudently as possible.
Just because you have decided to invest in real estate doesn’t mean that you have found an easy way to pay the bills associated with such an investment. There are a few good ways to finance your first real estate deal. One of the most common ways to handle this is through a line of credit on your current home. Most banks will offer up to one hundred percent of the value of your home through a home equity line of credit, and in many cases, this will give you the cash you need to get started in the investment market. Another good way to get the money you need to get started is through the use of a hard money loan. These are private loans made with strict repayment schedules. They are not as difficult to obtain as conventional mortgages, and they were designed specifically for investors. The terms tend to vary from lender to lender, but in general, this is a great way to get started in the real estate market.
Once you have a property and a financing strategy, you are ready to get started in the world of real estate investments. Be sure to ask for help when you need it, and your investment hobby might just turn into a lifestyle.