Real Estate Investing
Real Estate Investing can be a difficult topic. However, we’ll keep it simple and easy to understand.
To invest in Real Estate you don’t necessarily have to buy a home. The easiest way to invest in Real Estate is by selecting a mutual fund called a REIT (Real Estate Investment Trust). All mutual funds should have at least one fund catering to Real Estate Investing. These investment trusts will invest money in apartment rental properties, townhouses, senior citizen homes, malls, university housing, commercial real estate and home developments among many others. A REIT is very popular with folks who don’t want to own property outright. It gives you an alternative and flexibility toward investing without buying a home. A REIT pays out approximately 90% of their earnings in dividends to shareholders on a quarterly basis. Everyone should own a REIT as part of your investment portfolio. However, one should be cautious during these bad economic times. One thing is for sure though, real estate is a hard asset and it’s an excellent way to keep your money safe for the long term. Also remember that you can live in your home.
Real Estate is currently in the rebound stage and it all depends on where you live. Currently California, Nevada, Florida went through some really hard times. You have to remember that these places sky rocketed based on speculation not sound investment principles. A lot of folks bought homes by taking out the equity of their current home in anticipation of making a profit (flip)or gamble on a second home. After a while some of these folks started to get burned since the buyers were not credit worthy. The banks just started giving money away and people started to buy at any price since banks continued to feed the bubble in this case the sub- prime borrower. The market, however, will thrive again so do some research and invest wisely.
Below we will cover some popular ways to invest in RE, but please do your homework and don’t jump right in. Do research in your own local communities before venturing out. Your own local real estate market is a good way to evaluate current market conditions. Look at the job situation first. Jobs is the main driver in any RE market. Without jobs people can’t afford to buy or rent homes. Look at the current Detroit Michigan problem with the three big automakers. Detroit’s housing market can significantly tank if these folks are not bailed out.
Fix and Flip
Fix and flip is a money making strategy where you buy a house, fix it up and then sell it a short time later for profit. This is an excellent way to make money, but it only seems to work in a bull real estate market. I would not take a chance at flipping properties during bad economic times. Although real estate investing can affect local communities differently, I would not take a chance. There are different ways to play the real market in ways that can help you sleep at night. However, keep your eyes always peeled for opportunities. The best way is to ask a local real estate agent about the current housing situation. You can also easily find out what the last three homes were sold for in your local community. This information is public or just ask the real estate agent. I’m sure they’ll be willing to work with you since they’ll try to get whatever business they can get so offering information to you might benefit them in the long run.
A distressed property is a home that is in poor physical condition that will need substantial repairs, but you can find priced much lower than market value. Certain fix and flips can be considered a distressed properties, but I think the repairs are greater. Again, this is a strategy that you will not want to get into when the real estate market is down. Always, check neighborhoods to see if houses are selling fast or how long they’ve been sitting on the market. Remember that everything is related to supply and demand. If there is no huge demand for houses because buyers are lacking, you will not want to get into these types of properties for investing. Consider another strategy, but always keep your eyes on the neighborhood.
Let’s say you buy a house or an apartment, make minor repairs, paint it, fix the windows and plumbing. Then you to rent it since it’s a down real estate market. You want to make sure that your rental will cover the mortgage, taxes and insurance. If you clear all those expenses and still have, let’s say $150.00 extra in positive cash flow then that’s considered an income property. This is a good way to make some extra cash while you build equity on your property. This has a huge advantage since your interest on the loan is tax deductible. Not only are you making a positive cash flow every month, but come tax time you get the opportunity to get a little extra back from the tax man. Look for good solid neighborhoods where young professionals might be looking for a place. If you can’t do it alone, get a trusty friend or a family to join you. Again, the same principal applies, real estate is a local market so see if there are good deals out there. Most people may want to rent instead of buying a home during down real estate markets. You may also want to check local laws because if you tenant loses her job and can’t pay the rent you might not be able to evict her legally so again do your homework before taking the plunge.
For more information about Real Estate visit the National Association of Realtors
We also cover tax liens on this site where homeowners are not able to pay their taxes and the county has a sale on the house. There are so many strategies that one can use. We just have to learn about them, do your research and then pull the trigger. Don’t be afraid, you can do it.