Real Estate Investing 101

Written by on January 22, 2013 in Money - No comments | Print this page

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Real Estate 101Real Estate Investing 101

If you want to build wealth and acquire financial freedom, you have to find a way to make money that does not involve a direct exchange for your time; this is where investments come in.

There are lots of different places you can put your money and all come with a degree of risk, naturally. Real estate is one such avenue offering many options. For the purpose of this article, I will be discussing investment in residential properties to create cash-flow income. Here are some important considerations.

Do Your Homework

You do not necessarily need to be a real estate genius to get into the game — after all, experience will be your most powerful teacher, but you do want to do some research prior to securing properties. Carefully research the area where the property will be located — you need to have an idea if it is growing or will start to grow soon or if it is on the way down.

If big businesses are moving in, there is a good chance the area is on an upward trajectory as these types of businesses do extensive research on demographics, income and other factors before deciding to establish a store there.

Look at lots of different properties to get an idea of what they are selling for and make notations on whether they need work and how much this would cost — gathering this sort of information can help you distinguish between the bad, good and great deals.

Consider Working with a Real Estate Agent Who Is Also an Investor

There is a lot to know about real estate, which is why people usually work with an agent when trying to buy or sell a home; if you are looking to invest, you would benefit from working with an agent who also invests.

They can show you their own properties they rent and offer valuable information, such as how much rent to charge. Investor agents will also be a great resource for finding the lawyers, property managers, insurance agents, inspectors and mortgage brokers you will need to work with.

Have a Partnership Agreement in Place When Investing With Others

So, you and your best friend decide to go into the real estate business together — that is great. You get along so well and share the same vision for the future, you are going to make so much money together. The idea of drawing up formal papers seems so unnecessary, but it is. Some would argue that it is even more important to do this in this type of situation than with a stranger.

Should problems occur down the line, such as one partner not being able to meet the financial obligations of maintaining the properties or one wanting to sell while the other does not, there needs to be a clear outline of what will happen in these cases. Do not think just because you are friends, you will work it out on your own.

Rent Units with Care

Once your properties are all ready to go, you are naturally eager to get some tenants and get that regular cash flow going. But, you want to curb your enthusiasm to make sure you get the right people. Problem tenants could end up costing you big time, both in terms of money and headaches.

Getting rid of a problem tenant is not as simple as asking them to leave — it can take months to get them evicted. Screen possible tenants carefully. Call references, ask to speak to prior landlords if possible, get income verification. While there are no guarantees with anyone, always go with your gut feeling on people.

This is a guest post.  Kelli Cooper is a freelance writer who has covered various topics in the real estate arena. In writing many of her financial pieces, she has often consulted with professionals in the field, such as John Studzinski.

Image courtesy of ddpavumba / FreeDigitalPhotos.net

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