Real Estate Investing for Everyone
Beware of Real Estate Investment Gurus and Naysayers
Having sufficient information --not unlimited sums of money -- is essential to putting together a satisfactory investment portfolio. The way to become informed is to study credible sources that explain the principles and mechanics involved in the selection, management, and disposal of investment real estate.
Avoid Real Estate Investment Gurus, Naysayers
Since the 1980s, late-night infomercials have featured real estate gurus who are eager to share their "secrets" of how to make piles of money with minimal effort and little or no cash outlay. Nonetheless, the recurring images of mansions, yachts, and smiling investors holding checks are meant to excite viewers into attending expensive seminars and buying pricey books, DVDs, and newsletters. But anyone can be videotaped in front of a house or on a pier full of boats, and some of those allegedly satisfied investors may be hired actors.
Clearly, infomercials are not reliable sources of information for individuals who are serious about investing in real estate. Nor are warnings and admonitions from relatives, friends, and acquaintances who themselves have never invested in real estate. Even horror stories from someone who used to own investment real estate may not be reliable; the person may have invested with inadequate information or on a whim.
Understand Local Real Estate Trends, Cash Flow, Financing
One of the “secrets” to being a successful real estate investor is that it takes time and effort to learn the basic principles involved and how to apply them. Fortunately, it is easier to understand how to buy, manage, and sell real estate than it is to learn the ins and outs of many other investment vehicles such as stocks, bonds, and exchange-traded funds.
Becoming well-informed means reading and studying the myriad available articles and books about investing in property. For instance, John Schaub's books outline how to build wealth through single-family and foreclosed homes, and Frank Gallinelli's books explain cash flow and the financing of real estate.
To become familiar with what is happening in their local real estate markets, smart investors also read local newspapers and find out what plans their local governments have for their communities. This includes knowing:
- the local population growth trends
- the age and income ranges of the local population
- the businesses and jobs coming into the area
By absorbing this type of information, investors will understand when and where to buy and sell property and how to reasonably price it.
Consider Risk Control, Wealth Protection
Real estate differs from many other types of investments in the degree of control over risk that the investor can exercise. A fundamental way to control risk is by thoughtfully selecting the type of property to buy, whether it is commercial, residential, or a combination of both.
The types of questions investors must ask themselves include:
- How much of the purchase price must be leveraged through a mortgage?
- How much cash flow should a property generate?
- How much contact with tenants is acceptable?
The decision of how to buy and hold property -- whether as an individual, a partnership, a corporation, or other entity -- is also crucial for risk control as well as wealth protection. Tax and legal professionals can help investors choose the proper form of ownership.
Enjoy the Real Estate Investment Payoff
By investing in real estate in a sensible and informed manner, individuals can control their investment dollars while gradually increasing their incomes, reducing their income taxes, and accumulating wealth. These are sweet rewards for the time and effort put into learning the proper way to build a real estate portfolio.
