So you've seen your umpteenth infomercial with the guy in his
neatly pressed button-upped white T-Shirt grinning ear to ear
waving his rock-solid no-money-down rags-to-riches real estate
investment course for 3 easy payments of a gazillion dollars
(but only if you call now) and now you are thinking, "wow this
looks like a great deal, I better get it fast before the special
offer expires." You notice how there's always a special offer?
Anyway, I am not saying this guy isn't telling the truth,
however regardless of which course or school of thought you buy
into there are several key areas that one must avoid when
engaging in any real estate related transaction.
Pitfall Number 1: Don't Overpay!
The whole point in investing is to find properties that are
undervalued. How does one find out what is undervalued versus
overvalued? Without getting into technical details, the bottom
line is you need experience. Yes much like shopping for anything
else, real estate is essentially one of the highest ticket items
in the shopping center of life. It's advisable to stick with one
market, perhaps the one closest to you in proximity as a
starting off point. Through your experience and asking the right
questions, you will eventually have a feel for the pulse of the
market you are looking after, and of course identify what is
considered a good buy.
Pitfall Number 2: Know the Market
Yes, you are actually going to have to do more work! This part
is really common sense though, but executing it where the beauty
and the payoff comes in. How do you make money in real estate?
The most basic way is to buy low and sell high. So from the
first step, you have identified general trends in the value of
homes, and are pretty good at spotting undervalued homes.
Assuming you acquire that home, you may want to profit from it
by selling it off to someone else for a higher price. How can
you do this? Well there are many ways. For one, most markets
appreciate in value over time so if you want a longer term
approach that will work. Making upgrades to the property will
automatically raise the price of the home as well. Think in
terms of what the market wants, not what you personally want.
You aren't the one buying it; you are trying to sell it to
someone else for a higher price than you bought it.
Pitfall Number 3: Know Your Budget
It may be a fine philosophy to go through life on a whim, but
real estate is serious business, and thus diligent financial
planning and budgeting is critical to your success. Don't worry
you don't need to be a finance geek, however you need to be
disciplined and know your budget from the onset, or you may be
finding you are learning that you need to make certain
renovations or upgrades, and didn't anticipate it going over to
a certain cost. Think ahead as to what is needed before actually
going forth with investing in real estate.
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