As an investor, you face three challenges—finding the right property, buying it right, and then managing it. You will need: A good real estate broker who is interested in helping you reach your goals A lawyer who specializes in real estate An accountant Line up all three before you make your first purchase. You’ll need them to locate and then analyze the proposed investment. To prepare, talk with brokers, read the papers, visit open houses, and develop some expertise so you’ll recognize a bargain when you see it. Read everything you can find—but don’t send hundreds of dollars for home study courses advertised on cable TV infomercials. Those couples going from welfare to riches because of a course advertised there may just be as believable as the people who lose 50 lbs. in four months and keep it off for a lifetime. Materials on investing in real estate are available in local bookstores and for free in the public library. Take basic real estate courses at community colleges—the sort offered to rookie real estate salespersons. That will give you the vocabulary and some basic information, and your fellow students may eventually prove helpful. Start Small It’s wise to start small for your first few transactions so that you’re not risking too much capital or taking on too much liability while you learn. The old adage goes, “don’t invest any more than you can realistically afford to lose,” but it’s also said that investment in real estate is one of the better risks in the big scheme of things. A one- to six-unit building or a small, low maintenance house in a familiar neighborhood near your own home is best. If the place needs fixing up, pay for a building engineer’s inspection so that you’ll know what you’re getting into before your purchase offer becomes firm (the lawyer can help arrange that provision). Try for property that will appeal to the largest number of responsible prospective tenants. Avoid Land Forget about vacant land, condos, or building lots in resort areas. Land has to appreciate markedly before it pays off because it produces no income, ties up your money, and requires tax payments. Judging which areas will be in demand in years to come takes skill and expertise, and even long-time investors can get burned. Land is no investment for beginners; even seasoned veterans tend to shy away from land purchases because of their inherently uncertain prospects. |
