Real Estate Investing Sagacious or Silly? The point of view of an opponent
The opposite in me is licking the ribs with the prices of the houses in the United States. The US market has suffered severe corrections in recent years. Economic uncertainty is still up in the air and there is the possibility of more mortgage defaults on the horizon.
Real estate investing is a game of risk vs. reward. While the old saying is location, location, location, you can also add time, time, time to the equation.
The key to winning in this market is understanding the market economy and the correct price that will support the market. First, a review is made of the fundamentals of buying and selling real estate, and how they apply in this market.
Buying and selling real estate requires discipline, tolerance for risk, and an understanding of both the market and the marketability of the home you want to sell. It must be well financed and focused on the bottom line of the transaction. Real estate investing is a mix of excitement and business. Gone are the days when cheek and a good banker would allow you to earn money.
Rule 1: know your market and your buyer. Understand how much they will earn, whether they are likely to work, their age, family status, and education. Once you have a deal in place, you need to know that it will close. No money … no deal.
Rule 2: Know the area. Can your buyers find work? Are employers entering or leaving the area? This will have an impact on the attractiveness of the area to lenders. What are the average salaries in your area? Understanding this will allow you to determine the price at which you should trade. This is in addition to the usual proximity to shops, schools, churches, and transit.
Rule 3: Be well funded. You cannot trade a shoelace in this market. Your prospective investors or bankers will want to know that you can stay in the game until it closes.
Rule 4: Choose your goals carefully. You must buy between 25% and 30% below the target sale price to make a profit.
Rule 5: Understand what you can fix and what you need to stay away from. Today’s market will allow you to take a closer look at the home to make sure you don’t have to include structural repairs in your modernization.
These rules will allow the investor to begin the search for available properties. Close quickly and with the assurance that you know that the house will allow you to make a profit for you and your investors.
Ignore the rules? You can also start throwing hundred dollar bills out the window.