Anyone who plans to invest in today’s real estate market, and is new and inexperienced, should heed this advice: Stay out of it! Yes, all those properties being foreclosed can tempt someone who has the funds to try and get in on what they may think is an unfailing way to make big profits, but don’t kid yourself, the only investors who are profiting from today’s housing bust are the real professionals.
Most of the amateurs who made money investing in property during the real estate boom years did so purely by accident, and when the housing market began to fall apart just a few years ago, most of these get-rich-quick schemers went belly-up. The reason they failed was because of their inexperience, and the fact that they were speculators, not true investors.
The real estate investment professional has a strategic plan that is adaptable to prevailing market conditions, and will walk away from any deal that does not meet a certain criteria.
Many new and eager investors went after single family rentals, but either miscalculated, or neglected to calculate, carrying costs versus rental income, for example.
When large numbers of houses for sale suddenly appeared on the horizon as the housing market began to fall apart, resale prices began a rapid fall as foreclosures began a rapid rise, and many of these so-called real estate investors were stuck with inventory they couldn’t get rid of without taking a painful loss.
Some inexperienced investors think they can make money with fixer-uppers, but so many investors are looking for these same properties, that finding one of these homes at a bargain price in today’s market is like looking for the proverbial needle in the haystack.
The true professional investor will most often focus on specific types of properties, properties that are a good fit with the investor’s game plan, and may do only a deal or two for every fifty, one hundred or more properties considered.
Wise investors interested in rental properties, carefully evaluate all the operating costs of a property before making a commitment to purchase. For example, mortgage, taxes, insurance, marketing costs, repairs, upgrades, replacements, utility costs, trash hauling, move-out repairing and painting expenses, etc.
Since the carrying costs of maintaining a rental property can be so high in comparison to rent, the astute investor will only consider purchasing these properties at considerably below market prices.
Finally, no real estate investment will pay off in the long run without a sound, and well thought out exit strategy. Every experienced real estate investor knows this, and the lack of a sound exit strategy, or none at all in some cases have been the downfall of many new speculators.
Cape Coral Andrew, 1 year ago
While I agree with some of your post I do not think that the amateurs should stay away. If you ask almost any successful person in life they will tell you that real estate investing had a huge role in that success. My advice for a rookie investor is to do your homework and find an experienced and well rounded Real Estate agent to assist you in the purchase. For someone that has the financial ability to purchase now, should do so. I do not mean to go out and buy the first foreclosure you can find but this is a buyers market and for good reason. We have houses in SW FL that are selling for under 50k and renting for 1000 per month, this sounds like a good investment to me. The rental market will be in high demand for the next few years to come because all of these people losing their homes to foreclosure now have to rent. You can get in now while it is close to the bottom just make sure you have done your research and have had a HOME INSPECTION.
admin, 1 year ago
Andrew,
Thanks for stopping by. I was actually trying to make a point that as a real estate investor, if you aren’t going to invest the time to evaluate the real estate market and create a plan, than stay out.