As a beginning investor in real estate, it is imperative that you start with a solid strategy and understand the fundamentals. In this article, it is my intention to offer a few insights into real estate investing for beginners.
A few ground rules...
First let's agree that unlike stocks or bonds investing, real estate investing is not considered a 'Liquid' investment. What this means is, you can not sell real estate as quickly as you can sell stocks or bonds. Stocks or bonds can typically be traded very quickly through a stocks brokerage firm.
Real estate however, requires skill, patience, a marketable product and technique to liquidate. Even when using a professional, it may take awhile to sell investment property.
Realizing this at the beginning of your investment strategy will save you grief and money during the life of your investments. Knowing you can not simply 'Flip' (the process by which you can buy and sell real estate property very quickly) every real estate investment opportunity that comes along will assist you in making sound investment decisions.
Commercial Real Estate Investing
Due to the complexity of commercial real estate investing and the calculations used in strategies, this article will focus primarily on residential real estate investment strategies. At times, we may discuss items relating to commercial investments, but only when needed for clarification.
Investment Financing
Before you begin to look for a real estate investment , it is advisable to research how much you can afford. One way to accomplish this is to find and work with a qualified professional real estate agent who knows the area in which you are interested in purchasing. Agents often work with and can suggest a lending company or mortgage professional.
In addition you can work directly with a lender or mortgage professional.
Working with a real estate agent provides you with several benefits, not the least of which is they are typically well informed of news and growth markets in the area you are interested in investing.
Investment Strategy
Long term or Short term Investing: Let's describe long term investing as real estate purchases that are maintained for more than 5 years. Short term investments we will consider purchases maintained less than 5 years. The length of time for either of these strategies canvary greatly depending on market conditions and income/expense ratios from the investments and other factors.
Along with your investment strategy of long or short term investments, an advisable consideration is what do you expect from a Return On Investment (ROI) perspective. ROI can best be described as how much money you expect to make on your real estate purchase and in what time frame.
Summary
Intelligent investing is about balancing risk and reward.
Real estate investing requires education, and for new investors it is advisable to work with an experienced real estate professional. Let's not forget lots and lots of homework and research.
If you take your time, work with a knowledegable real estate professional, there is no reason why you would not be able to realize the financial gains others have realized in real estate investing.
End of Part 1
? Copyright 2008 Jennifer MacKay. All Rights Reserved.
