When you first decide that you want to begin investing in real estate, it can be a nerve-wracking and somewhat frightening experience. After all, a serious mistake can be disastrous. That's the bad news. The good news is that you can minimize your chances of making disastrous mistakes by simply following a simple formula. Beginner's Jitters First, you need to accept the fact that you're going to be nervous--sometimes to the point of paralysis--when you first start out. That's normal, and there's every reason for you to be cautious. However, you must overcome that paralysis if you're going to become a successful real estate investor. Educate Yourself Now that you know being nervous is normal, how do you get over it? You begin by gathering lots of information about properties, the area, the prices of homes for sale and recently sold in the area, your financing options, how much it will cost to fix the property for resale or rental, and anything else you can think of that might come into play--BEFORE you make an offer. That doesn't mean you can take a long time to do all that, especially in a competitive market. However, don't make an offer until you HAVE done your research. If you lose out on a property or two at first, don't worry. There will be others, and you'll get faster at gathering your information as time goes by. Make Offers To make your offer, make sure you know how much the property will be worth once you've done the fix-up, if you're planning to flip the house to generate capital. It's often a wise idea to pick a certain area and work it exclusively, so that you become an expert on what houses are selling for. That way, you know within a relatively small fraction how much profit is to be made when you sell. (Of course, you always want to leave yourself a cushion, because almost every property will harbor some sort of surprise that will cut into your profit margin.) A very general rule, although you can't use it in every situation: You should be able to purchase a property you're hoping to resell for at least 20 percent below its market value if it DOESN'T require any real fix-up other than some cosmetic cleaning and detailing. If it needs more than that, you MUST lower your offering price accordingly. Once final tip: don't be afraid to negotiate! You must be able to make a profit, and if you can't get the property for a low enough price to allow a reasonable profit, you must be disciplined enough to walk away and begin looking for a different property. Don't give up--make a lot of offers. Bargain properties waiting for smart investors are all around. Copyright 2006 Jeanette J. Fisher |
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