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How to Eliminate Risk in Real Estate Investment


Have you been tempted to invest in real estate, but are leery because of the risks involved? Are you afraid of being stuck with property you can't sell, or can only sell at a loss? Perhaps you've heard horror stories about the buyer who got a great deal at a foreclosure auction - only to find that their sale included assuming the remaining mortgage on the property. Luckily, there are ways to reduce and even eliminate many of the risks associated with real estate investment.

Like most other things, one of the keys to eliminating real estate investment risk is knowledge. This includes both a thorough knowledge of the real estate industry and the laws surrounding it, and in depth knowledge about each particular deal. Research is your most important skill.

Research Foreclosure Laws And Sales

Learn everything there is to know about foreclosure sales, as foreclosures are likely to be one of your best sources of low cost homes. Understand the workings inside out so that you don't get caught flatfooted by an unexpected condition to a sale.

Research Your Market Daily

Keep a close eye on the current interest and market rates. They're one of the best predictors of housing prices. Learn to recognize the signals of a market upturn that make it a good time to sell, or a downturn that makes it a bad time to buy. Understanding the vagaries of the local real estate market can prevent you from making costly purchase mistakes.

Research Each Property You Plan To Buy

Be particular about the properties you purchase. Inspect documents, and do a thorough title search to make sure that there aren't any existing liens against the property. Avoid being surprised by unexpected expenses with thorough inspections of every property, preferably by an expert home inspector.

Research The Real Estate Market

Understanding what sells and what is most valuable can help you avoid investing in costly repairs and improvements that don't offer a good return on your investment. Keep an eye on housing sales trends to help you plan purchases, repairs and sales.

Research Your Buyers And Renters Thoroughly

Check references, especially if you're leasing or renting property. Check housing court records, personal references and job references. History is still one of the best reflectors of a person's ability and likelihood to pay bills and rent on time.

Research The Possibility Of A Limited Liability Company

Particularly if you intend to hold properties long-term as rental units, investigate forming a limited liability company (LLC or LP). In the event of a suit against the property owners, an LLC can protect your personal property and savings from attachment and limit collection to the assets owned by the company.


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