Real Estate Investing Articles

"Real estate fever- its hit the Country likes a plague. Zillions of "newbie's" are hitting the bandwagon, trying to build a profit where they lost in the stock market. We met them all the time, and many are making big mistakes!

Stock Market Mentality

You'd think after losing $7 trillion in the stock market people will have learned enough! Nope, they are making the same mistake that is assuming what happened yesterday would happen tomorrow. Nine of ten new investors we met said they are interested in real estate as they saw someone else make money from the rapid enjoyment of the market over the last few years. But, buying real estate exclusively for short-term appreciation is frequently a big gamble! If you buy real estate to hold for 15 years or more, the chances are you would come out on top. If you purchase a property and flip it in within a year, you perhaps are fine, too. And, despite the risk, many people could cleverly time the "boom" of a local market (or subdivision within a market) and create a profit. But, if you purchase a rental property for full market price with break even or pessimistic cash flow, you'd better have a backup plan if the market doesn't keep going up. Investing is a lot like surfing... if you don't know how to travel the wave, you would drown!

Investing Blind

You'd think after losing $7 trillion in the stock market people might have learned! Nope, they are making still the same mistake, which is blindly buying real estate based on false advice or complete lack of education. Real estate is one of the few investments in which risk is straight proportional to knowledge. True, it has a higher learning curve than investing in the stock market, but there's no evidence that having knowledge of the stock market decreases risk (just ask your mutual fund manager).

No Cash Reserves

In order to stay in real estate long term, you require cash reserves. Buying real estate not anything down is easy; handling pessimistic cash flow, repairs and other expenses in the interim is the trick. In fact, if you could handle the bad times, real estate would always create you come out on top. Lack of cash reserves puts needless pressure on you to do imperfect repairs, believe less than capable tenants and give into tenants' demands for fear of vacancy.

Being Greedy

Many investors get started flipping properties to other investors that is a good idea to generate cash reserves. However, you must be sensible about how much profit is in a deal. If there is a potential for a $20,000 profit in a rehab project, you can not expect to make $10,000 flipping that property to a rehabber. A rehabber has a enormous risk in embarking in such a project and needs a large enough profit to justify the risk.