Investing in real estate is a consideration that passes through many people’s minds at some point. However, as is true with most unexplored courses in life, the task seems daunting and esoteric and the thought of losing money for a lack of knowledge holds people back from pursuing the thought. I will not encourage anyone into a mindset that such barriers do not exist; however, I would encourage everyone and anyone to explore the possibilities and make an individual assessment as to his or her own ability to enter a rewarding market.
The foundational step for an investor with little experience in real estate is to develop an understanding of the opportunities available. This means researching what approach is best for his or her own financial and knowledge base. For example, there are a variety of forms in which one could invest in real estate. You could play for keeps and buy up units with the intent to lease space to renters. This is a normal occurrence in residential living, office space, as well as large commercial centers. An investor could also involve themselves with a real estate investment group, which is best conceptualized as a mini-mutual fund that pools resources for the benefit of the investors as a whole. In such cases, investors buy into the group with their property and pool portions of their income for group costs e.g. one property has an unusually high volume of vacancies. A third option is to invest in real estate, in the form of stocks. Real estate investment trusts, REITs, operate as a corporation of investors, so you simply purchases your share of the corporation and receive dividends. An investor’s behavior will adapt in each such situation; therefore, if a beginner is more experienced in behavior associated with one particular form of organizational operation, they should approach real estate with that in mind. And although this is by no means an exhaustive breakdown, these examples also help to highlight the complexity of the real estate industry, which will require an energetic approach rather a simple mindset of ‘I invest, I get what return I can’.
Investors should know the market in which they hope to invest. Know the trends, know the needs of the community i.e. demand. Be thorough in your assessment of post-investment costs, and understand the tax and regulatory end, meaning understand what will raise your property taxes and understand the local zoning ordinances. Everybody has a friend with experience relating to real-estate; use those contacts to find reliable plumbers, electricians, agents etc.
General Do Not’s
Do not tie up your money or credit in something you don’t understand, even if it appears to be a great deal-always know your risks and assess your secondary costs. Do not be lazy-use the Internet to your advantage in research as well as self-promotion.
I will leave you with a useful resource: http://realtormag.realtor.org/news-and-commentary