There are several shows on television that feature people buying properties and then flipping them after minor repairs. Many people make a profit doing this, but if you really pay attention, you will often only see what the house could make the owners. The shows often leave out when and for how much the home sold for.
Nonetheless a lot of people counted among the world’s richest began their careers in real estate. Little wonder why real estate investment is a big hit up to now. Join us as we proffer some pithy advice to people planning to enter the exciting world of real estate.
Educate yourself on market timing.
Basically this would require you to do some research on marketing cycles AND do some observation as well on how they actually work. The fact is that markets go up and markets go down. Most successful investors are hardly interested in the whole fix ‘n’ flip scene which is so popular these days. They simply buy low, sell high – a fundamental concept in the world of investment.
Know how to analyze real estate numbers.
You have to have a basic knowledge of the variables that are influencing your bottom line.
Cash flow, appreciation, loan reduction and tax benefits are the four most important parts of real estate investment. These four aspects work in concerto with each other to provide a symphony known as rate of return – so understand the “notes” each of them “play.”
Real estate isn’t simply making you a profit when it appreciates. And it isn’t necessarily losing money when it depreciates.
Be aware of your area’s economic trends.
Real estate is, in a way, about seeing the forest for the trees – you must do a health check on your national economics, and not just the figures related to its growth. For example, if interest rates are rising, you need to understand that borrowers are being cut out of the market.
The six aspects of economics you must understand are: mortgage interest rates, affordability indices, supply and demand, demographic information, commercial real estate and the job market.
If family time and work time allows, then macro and micro economic classes would comprehensively inform you to a great extent. Macro will help the investor understand the large forces that impact real estate, such as recessions, national interest rates, war and demographics. Micro will look at individual sectors and focus on the local real estate market, such as local disasters, local recessions, unemployment rates, supply and demand, new housing starts, housing for sale and types of vacancies.
If you want to really become a real estate investor, it is important to be informed and educated. Yes, if you are just buying and fixing up and selling one house, you have the potential to make money. But if you plan to do this as an investment, you need to obtain the necessary education. Otherwise, you are gambling with your money.
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