Everyone knows that making a mistake in a real estate investment can be costly--or even disastrous. However, there are ways to bullet-proof your investing. Here are a few tips on how you can do it:
When you look for properties, either avoid altogether or be very cautious if the area's economy is largely based on just one employer. If that employer shuts down or cuts back drastically, that entire area's real estate market will be dramatically affected and you could get burned.
One exception to that rule would be a town that is home to a large, old, and well-established university. Such an establishment will have a steadying effect on the community that surrounds it, and there will always be a need for the many employees and students who are associated with the university.
Stick with Proven Strategies
If you're not a gambler, it's best to stick to investing in tried-and-true single family homes. There's always a market for them once you've fixed them up and are ready to resell. If you plan to rent your investment property out, single family homes are the easiest homes to rent, assuming they're not too expensive.
Guard Your Money
Always maintain a reserve fund, because unexpected things WILL come up as you go through the rehab process; that's just part of the investment game. If having to pay for an entire roof, including the sheathing, will mean that you can't pay your own mortgage that month, you're too close to the bone. You must make sure that an unexpected expense isn't going to sink you.
Know how much you're going to make when you make your offer. Although we've just established that things will come up that you can't predict, you should know what the house will sell for before you make any kind of an offer. That way, you can build in a cushion that will assure you of making a profit, even when the unexpected takes place.
Plan Ahead and Act Quickly
Get through the rehab process as quickly as you can. That way, you won't be surprised if the economy takes a downturn later on. You know what the economy and market are like at the time of purchase, and you want to be able to sell under essentially the same conditions. That will take a big load off your mind.
Become an expert in a particular area and type of home. That way, you'll eventually get good enough at knowing what homes are selling for so that you can make your offers quickly and as accurately as possible. Quick action gives you an edge over any competition you might have when it comes to making bids on properties.
Whoever said "knowledge is power" knew what they were talking about when it comes to buying and selling real estate.
Copyright ï¿½ 2006 Jeanette J. Fisher