The Art of Smart Real Estate Investing
Real estate investing is of interest to many people, particularly now, with the world economy still being in a state of uncertainty. Real estate investing is viewed as a possibly lucrative source of income that, perhaps, sounds easy to the average consumer. The investing process can be streamlined with knowledge and experience, but it is not necessarily easy starting out. However, armed with the proper tools, real estate investing can be economically positive, challenging and rewarding.
The first, primary tool the average consumer needs is solid knowledge of the housing market in their local area. The consumer should ask themselves questions such as, the number of houses available in a certain area that are for sale, what is the current market value of the houses in that area, and as many details as can be ascertained regarding the reason for the property being for sale. In today’s economy there are many foreclosed properties for sale. A foreclosure is a property that the owner was unable to pay for, and had to move out of it. If it is a mortgaged property, it is now owned by the mortgage holder, usually a bank or a mortgage company. Many times these properties are offered to the general public, at a reduced selling price, either by what is known as a “sheriff’s sale”, in which the property is auctioned off to the highest bidder, or through a local real estate agent. In a large number of cases, the bank or mortgage company will buy back the property at the sheriff’s sale and then employ a real estate agent to sell the property at a profit to the bank or mortgage company. First time real estate investors can purchase foreclosed properties, fix what is wrong with them, and resell them on the open market at a profit. This is commonly known as “flipping”.
Foreclosed properties can be a worthy experience for the first time real estate investor if their homework is done. While varying rules from state to state apply, generally speaking, foreclosed properties can only be viewed from the outside. They are sold “as is”. Or, you take your chances purchasing it, and if it’s not what you expected, you still own it. If you are fortunate enough to have personal knowledge of the inside of the property, you will have an advantage. If the property is in your neighborhood, you may politely inquire of neighbors regarding the property.
If you purchase the property, you will most likely have to finance it, unless you are fortunate enough to be able to outright cash purchase it. If it is financed, you will have a number of house inspections to undergo. The first is known as a pre purchase inspection.This is a visual analysis of the property to determine the house’s condition. Since the inspector would need to go inside the property, this is not always an available option with foreclosed properties, but would be if you selected a property through conventional means. The pre-purchase inspection will give you the defects and the advantages of the property.
Another of the house inspections that are necessary is a building inspection report. This inspection is more comprehensive, covering such details as the overall construction of the property, structural elements and foundation of the property, exterior components such as the condition of the roof, drainage, gutters/ downspouts, sidewalks/ driveways, garage and patios/decks, and the exterior condition of the heating and cooling unit. Also included in a building inspection report is an analysis of the interior heating/cooling, plumbing, electrical, windows and doors and walls and ceilings.
While the various inspections and the cost thereof might be slightly overwhelming or intimidating to the first time real estate investor, it is money well spent. Determining the true value of the property will give you insight into the actual profit you will make.
Category: Real Estate
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