Advertising on the internet and late night TV has lead many investors think they can enter the real estate market with no money down or by using other people’s money. While this is unlikely at least at fist it is possible to make money in real estate and once a track record is established it should become easier to swing deals with favorable financing which could include putting zero down or using other people’s money.
Real estate investments like all investments carry risk and if you don’t know what you are doing you could loose big time. Most of the so called real estate gurus you see on TV or the internet make real estate investing seem simple and straight forward. However it is seldom as easy as you might think from these pitches. Real estate investing is a business that should have a well thought out written business plan with sound goals and objectives.
First the investor will need to decide the type of real estate investing to start with. Then some research on the local market where the investment will occur is needed to start the business plan. Also, some research on financing options will be necessary as well as putting personal finances in order. Once the business plan is complete and financing options have been studied and prepared for it is time to begin searching for the first investment property. After locating a property that fits the business plan make sure you have planned for all conceivable contingencies incase something goes wrong. You may even consider taking in a partner to reduce you risks and strengthen your financing options.
It is important for your plan to include an exit strategy. When you sell the property will you simply take the money and pay taxes on you gain or will you defer taxes by reinvesting? Will you finance the property for the investor and collect payments and make additional money from interest or will you require the buyer to arrange the financing so you can take your money for other investments? If something goes wrong and you are forced to hold the property longer than expected how will you deal with the unexpected consequences?
Real estate investing involves risk and careful business planning, if you want success you must plan for it and work hard for it just like any other business. After the first successful deal is completed it won’t necessarily become any easier, each deal will require hard work, but the investor should gain knowledge and confidence which should lead to more success.
