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Real estate investing runs the gamut in terms
of risk and investment success. The first rule
of real estate investing, even before location,
location, location, is be very careful with whom
you are dealing. For some reason, real estate
is fraught with unscrupulous characters, many
of whom you’ll see on late night television
commercials with their "no-money" down
methods of becoming millionaires. Only a very
small percent of these so-called real estate gurus
are legit.
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When
it comes to investing, everybody has certain goals
and aspirations. However, we have found that there
are certain guidelines every aspiring real estate
investor needs to know:
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Compare Property Values and Rents :
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Financial
statistics only go so far; the best measure of
a property's market value is often the sale prices
of nearby properties. The same holds true for
area rents. A low price can often be justified
by a reasonable rent; renters who can afford a
high rent can afford to buy instead, so reasonably
priced rent is a need.
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Be careful - Tax laws
may change :
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Don't base your tax investment on current tax
laws. The tax code is constantly changing, and
a good investment is a good investment regardless
of the tax code. The right property with the
right financing is what you should look for
as an investor.
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Specialize in
something you Know :
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Start in a market segment you know. Whether
you focus on fixer-uppers, foreclosures, starter
homes, low-down payment properties, condominiums,
or small apartment buildings, you'll benefit
from experience by specializing in one aspect
of investment real estate properties.
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Know the Costs
going in! :
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Know the financial statements inside out. What
are operating expenses? What are loan payments?
Vacancy costs? Taxes? What does the cash flow
statement look like? These are key issues that
must be addressed before making a solid investment.
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Know where your tenants
are coming from : |
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If the last rent increase was recent, your
tenants may be considering a move. If tenants
have a short-term lease, they may be living
there simply to attract unsuspecting buyers.
It is also important to collect the tenants'
security deposits at closing.
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Assess the tax situation
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Taxes are an integral part of successful real
estate investing, and they often make the difference
between a positive cash flow and a negative
one. Know the tax situation, and see how it
can be manipulated to your advantage. It may
be a good idea to consult a tax advisor.
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Investigate insurance coverage : |
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If seller's coverage is based on lower-than-current
replacement value, your insurance cost may increase
when you pay a higher purchase price.
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Confirm Utility Costs : |
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Ask
the local utilities to verify recent utility expenses,
especially if any of these costs are included
in your tenant's rent.
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Consult Your Accountant
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Taxation is a key element of successful real
estate investing, so be sure to find an accountant
who is well-versed with the constantly evolving
tax code.
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Inspect! : |
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Make sure that you always perform a thorough
inspection of the property before buying it.
Never, ever buy any property without at least
examining the site. In some cases, hiring professional
inspectors to examine the structural mechanical
system may be a sound investment.
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