There are countless tips on real estate investing available
and this is by no means intended as a comprehensive list. While every
investment has its own intricacies and problems that need to be worked out,
there are some very basic aspects that are common to most investment
properties. Understanding those aspects and asking questions about them can
help you determine whether a particular real estate investment opportunity is
for you.
Anything Can Change
Building in the capacity for change in your investment is
not only good real estate advice, but good life advice. Aspects of an
investment can change at any given time and building in a little cushion in your
profit projections for that change will most likely give you a better outlook
on the possible outcome of your investment.
This is especially true for something like the tax climate
of your investment as changes in tax laws happen regularly. If the tax situation
surrounding your investment is the only thing you like about it, it is probably
not a sound investment. Solid investments can withstand changes in the tax
code, so never rely solely on the stability of tax codes, you will be sorely
disappointed.
Do What You Know
It is tempting to get involved in real estate investment
opportunities outside of your comfort zone. Maybe the terms look good or the
area is nice, but your lack of expertise in the field will ultimately hurt you
over the course of the investment. If you are well versed in multi-family
homes, do your best to uncover the best investment opportunities in that field.
If your bag is fixer-uppers, stick with that. Success is difficult to replicate
so if you have a knack for something, exploit that knack.
Compare, Compare,
Compare
As any real estate agent will tell you, valuations for a new
home put on the market are a direct reflection of other sale prices of similar
properties in that area. Your potential investment is the same way. If you are
going to rely on rents to make back the money spent on the investment, compare
the rents your prospective investment property takes in against similar
properties in the area. Are they too high? If so, that may indicate future
trouble filling the building at those prices, which then cuts into your profit
forecast.
If you are getting involved in a fixer-upper, compare what
you think the home will be like in the future to homes that have sold that look
similar to that now. Doing so will help you estimate your eventual sale price
and the amount of money you should invest to net a decent return.
Hammer Down True
Expenses
Just as you want to examine what your incoming cash flow
will be on any real estate investment opportunity, you want to investigate your
outgoing cash flow as well. What are the key costs involved in running the
property? What are the taxes on the property? How much does it cost you when
part of your multi-family property is vacant? Sometimes properties can look
great when you examine the rent payments coming in but then lose their luster
when you look at the cost of running the facility. You need to investigate both
sides of the story to get an accurate view of the financial future of your
investment.
Know The Building
In real estate investing, surprises are usually costly. Not
only should you do a full walk through of the prospective investment yourself,
you should also look in to hiring an independent, professional inspector as
well. Uncovering problems with the foundation, roof or furnace early can either
save you from making a poor investment or give you ammunition to negotiate a
lower price.
Not all real estate investments are the same and you will
likely run in to a unique problem on every property you pursue. However, by
sticking to the tips here, you can give yourself a great foundation from which
to operate. Above all, pursue information on the property as vigorously as
possible to eliminate the possibility of regretting your investment later.
Published by Joe
and Colleen Lane, Realtors®. The Lane Real Estate Team services
Tri City Wa Real Estate, Kennewick Wa Real Estate, Pasco Wa Real Estate, Richland Wa Real Estate, and surrounding
Southeastern Washington Communities. Here is more information : http://www.joelane.com/
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