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.