Real Estate Investing: Tips and Tricks

by Dominique (Dom The Dreamboat) Brown

(yea I, Dr Dean, made that nickname, but it fits…. go watch his videos-he wears those tight t-shirts just to show off!!!!)

 Dominique Brown is a financial planner, landlord, personal finance blogger and video blogger. He is the owner of YourFinancesSimplified.com where he talks about everything from being a new father to his worst financial mistakes. He is also the owner  of InsiderRealEstateTips.com where he talks about real estate exclusively. His writing has been featured at the  Huffington Post and H&R Block. You can find him either on Twitter, Facebook, Youtube or Instagram.

Purchasing Real Property-Craziness?

Well no, at least not a clinical  DSM type mental health diagnosis, but seriously, I can understand that real estate investing may well be toward the bottom of your list as a  preferred investments.

I get it! The housing market has been in shambles for several years.

The weak economy resulted in business failures and cutbacks, all of which have hurt the commercial real estate market. In many ways, real estate is a very scary investment now-just in time for Halloween… But…maybe that is exactly why it deserves a second look!

Warren Buffett, arguably the most successful investor of our time, is fond of saying, “Be fearful when others are greedy. Be greedy when others are fearful.” Buffett’s forte is stock, but his statement is no less applicable to the real estate market.

 What is Real Estate Investing?

To be certain we are on the same page, here is the definition of Real EstateInvesting to which I subscribe:

•  The purchase of real property for the purpose of ownership, management, rent, lease or resale, all with the intent to profit.

 Risks of Purchasing property

Even in good times, real estate investing is a high-risk venture. It is capital intensive and very much dependent upon cash flow (you need positive, yea just making sure you’re paying attention.)

Add to that the limited liquidity inherent in real property (we’ve all heard the expression “land rich, cash poor”) and you have a pretty fair picture of why it is risky. That said, it is clear that successful real estate investment requires a fair amount of knowledge and experience. We’ll address that later.

Advantages of Real Property Investing

So what are the advantages of considering this type of investment  and why now?

•  It is a buyer’s market: The value of homes has dropped some 35% since the onset of the financial crisis.

• Mortgage rates are at record lows: The current 30 year fixed rate mortgage is available at 3.80%, and 15 year fixed rate mortgages are as low as 3.03%.

• Prices have nowhere to go but up (eventually):  The National Association of Realtors reports that in the first quarter of 2012, roughly one-half of the markets they track saw a rise in home prices.

• Real estate investing comes with a number of tax advantages for investors: The big three are depreciation, capital gains and the 1031 exchange.

(If you’d like to know more about tax stuff, request additional articles in the comments…)

Although media focus has been focused on the “bottom falling out” of the housing market, a more objective analysis suggests this was just a much needed market correction.  A big one  borne of the wild speculation occurring in the last decade or so.  Realistically the losses in real estate values have been no worse than those experienced in the stock market and no one can argue the fact that real property has grown steadily in value over the last several centuries let alone decades!

The problem with real estate is it rebounds more slowly than the stock market. However, you can turn that to your advantage. When the stock market rebounds, timing is everything! It is still important with real estate, but real estate values don’t move at the lightning speed common to equities. With real estate, you can actually take some time to analyze the trend and see if it is real or just a bump. Please don’t interpret this to mean that you should procrastinate. I’m just saying you have the luxury of a little more time to let the facts develop.

Getting Started

Now that we’ve made a case for your sanity when it comes to investing in real estate, how do you go about it?

If you think about it, you already have. Do you own your home? Gotcha!

Seriously though:

1. Study for your real estate license.
2. Develop contacts by working in the field (even part-time).
3.  Track a few property listings (play fantasy football, only with real estate).
4. Try acting as a broker (tie up a property and market it to another investor).
5. The web has limitless resources that can help you learn about the real estate market.

Many people, no brighter, wealthier or more knowledgeable than you,  have made successful careers in real estate. If you have been considering real estate for investment purposes, all the indicators are hinting at a recovery in market values. Getting in the market now, rather than later, will give you the most bang for your investment dollars.

by Dom Brown

Reader Questions:

Are you thinking about investing in real estate? Are you doing so currently? Either way let us know your questions or how it’s going for you.  Let’s learn from each other.

{photo credit: Phil @ ptmoney.com}

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Tags: how and why to get started now in real estate, real estate investing tips, warren buffetts real estate tips, why now is the time to invest in real estate

This entry was posted on Tuesday, October 30th, 2012 at 6:00 am and is filed under Investing, personal finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.