Monday, January 25, 2010

How Does Real Estate Investing REALLY Work?

If you are looking at going into the world of real estate investment, make sure your expectations are realistic. You need to be patient for the good deals to come and not jump on just anything that could lead to regrets later.

Know first and foremost, you will have to spend money. When buying real estate, there will be cost of borrowing, closing fees, attorney payments, agent commissions or down payments; unless you join a network of investors who rely on a middle man type service that eliminates the extra costs associated with buying investment properties on the traditional market. Any promise that you can make money from real estate investing without spending money is one you should walk away from, it’s absolutely not true.

Make sure you choose a good location, buying the cheapest house is not the only factor.
Know the market, find and learn the location that will be profitable. If you still have that cheap deal in 2 years, you obviously don’t have the location of interest for buyers.

The claims that you can make hundreds of thousands of dollars in real estate investing probably came from someone who forgot about the month of April. This is when capital gains tax is due on the profits of your investments and that can be a sizable amount of money. Yes, you’ll make money in real estate investments, but don’t forget that you have to pay taxes on that money.

There are tons of instructional DVDS and eBooks on the market as well as expensive seminars that are advertised as professional and certified services. Your best bet is to find a quality real estate agent that is familiar with the area you are purchasing property. They will know the foreclosure and short sale market. Spending money on a real estate attorney is worthwhile, they will know the laws on state foreclosure and redemption laws. Have a relationship with a good house inspector who will give you advice on properties and help you to make you sound investments.

A home appreciates over time, the longer you let it appreciate, the more money you will make on your investment. During this time, find quality tenants that are reliable and pay rent, making you a little cash while you wait on the appreciation. While you will make money in real estate investments, it will take time. Patience will be your best tool.

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