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Beginners Real Estate Investing Guide
Real Estate Investing - Ask
Questions Before Making an Investment
First Time Real Estate
Investor
Real Estate Investing - Planning
Your Investment Strategy
How to Find Real Estate
Investment Properties
Getting a Professional Home
Inspection
Large Profits From Inexpensive
Real Estate Repairs
Real Estate Investing - Costs
and Fees
Real Estate Insurance
and Risk Management
Real Estate Investment Risk
Part 1
Real Estate Investment Risk
Part 2
Getting The Best Return For
Your Investment
Creative Financing
For Real Estate Investors
Real Estate Investment Tax
Considerations
Real Estate Rental Properties
- Great Investment or Nightmare
Real Estate Foreclosures - Great
Deal or Headache
Flipping Real Estate for Profits
Slow Return On Real Estate
Investments
Negotiating for the Best Possible Real Estate
Deals
Real Estate - A Time to Buy and a Time
to Sell
Creating Your Real Estate
Investment Strategy
Investing and Growing
Your Real Estate Portfolio
Commercial Real Estate
Investing
Real Estate Marketing
Understanding Real Estate Law
Do You Need An Real Estate Agent?
What The Real Estate Mortgage
Lender Sees
Do You Have A Career In Real
Estate?
Rural or Urban Real Estate
Investments?
Real Estate Investing on the
Internet
Real Estate Investing
- Property or Paper? |
Real Estate Investment Risk - Part 1
Real estate investing can be very lucrative, and very risky. There are many
things that you must consider not only to determine what your risks are,
but also to manage those risks effectively. Without fully understanding and
managing the risks, you stand to lose your entire investment!
We start with the amount of cash that you have available for your investment,
the condition of the current real estate market, and your experience level.
In order to best manage risks, start by learning the law as it relates to
real estate transactions. You don't have to become an expert capable of passing
a bar exam, but you do need to know the basics, and have a professional on
your team that knows more than you do - such as a real estate lawyer.
Next, take a look at the current real estate market. Is it a buyer's market
or a seller's market? What real estate is available in the area that you
are interested in? Are there interested buyers? What is the potential outlook
for the area. For example, is a big plant being built or planned for the
area? If so, the housing market is about to boom. What about other employment
opportunities in the area?
Take a look at the construction of new homes in the area, as well as the
history of new home construction over the last several years. Will property
values rise or drop? You must thoroughly research an area - not just a property
- before making an investment.
When you've researched the market, and decided to make a purchase, minimize
your risk by having the property professionally inspected. Once you have
passed that phase, put down as much money as you possibly can, as this will
net you a much lower rate of interest, and lower mortgage payments in the
event that you need to hold onto the property for an extended period of time.
You should never invest less than 10% of your own money.
It is highly important that you determine how long you plan to hang onto
the property before you invest. Not only are there tax considerations, but
you must also know how long you will keep the property so that you can select
the right form of financing. For instance, for a short term investment, it
may be better to go ahead and get an adjustable rate mortgage, even if the
rates are high. On the other hand, you may want a fixed rate if you will
be holding onto the property for an extended period of time.
You must also consider insurance. There are numerous options, and there is
even insurance that will protect you in the event that payments increase.
You have to determine whether paying for such insurance is worth it to you.
You may be better off not having that insurance, and instead using the money
to make additional payments on the principle of the loan.
Many renters make the mistake of jumping into home ownership with low or
no downpayments, without fully thinking through the consequences of such
an action - such as higher mortgage payments and interest, and the fact that
as a renter, repairs and maintenance are covered by the property owner, whereas,
when you are the property owner, you are responsible for repairs and maintenance.
Put down as much as you possibly can, and make it a point to make at least
one, and possibly more, extra payments towards the principle of the loan
each year. Look for fixed rate financing when the interest rates are low.
Remember that the longer the mortgage period is - i.e. a 30 year mortgage
- the more you will pay in interest. Also, when making extra payments - those
that are not scheduled - specify how you want the payment applied. Otherwise,
they lending institution may apply the monies towards the interest, and not
the principle, which won't really help you out that much.
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Beginners Real Estate Investing Articles
How to Advertise a Rental
Property
How to Build Equity
in any Real Estate Market
How to Find Motivated
Sellers
Developing a Profitable Real
Estate Investing Strategy
Bird Dogging: Getting Started in
Real Estate Investing
Buying Your First Home
Using Lease Options to Purchase Real
Estate
Real Estate Foreclosures
Increase Your Net Worth Through
Real Estate Investing
Interest Only Mortgages
Real Estate Investing
No Money Down Real Estate
Investing
The Power of the Lease Option
Real Estate Investing Tips
Real Estate Investments
Refinancing Your Mortgage
Loan
Paying Your Mortgage
Selling Your House without a
Realtor
"Subject To" Real Estate
Financing
Using Trusts as a Real Estate
Alternative
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