Breaking Down Investment Property
"Investor" is a word that is thrown around pretty casually in any real estate discussion. A great many people like to think of themselves as real estate investors from time to time. We all know at least one friend or family member who has bought a house or two in an effort to become the next Donald Trump. While it's true that purchasing homes, land, and commercial property can serve as one of the safest, most reliable, and productive uses of your hard-earned money; it can also be a tremendous pitfall for those who do it casually and without the proper level of research.
All too often a new or former client of mine will pop up and ask about investment property. They have stars in their eyes after watching Vanilla Ice "flip" homes on HGTV. After all, if the genius who gave us "Ice, Ice, Baby" can do it, why can't they? OK, maybe that's an extreme example, but you get my point. It is simply not as easy as it seems to buy a house, fix it up, and then sell it quickly and for a reasonable profit. Can it be done? It absolutely can. It's just not as easy as television would have you believe.
My number one rule of investment property is: "Do not create a job for yourself." Many people ask what I mean by that statement, but it's really pretty simple. I don't want any of my clients going out and buying homes that are going to tie them to the property for months on end doing renovations and repairs that will net them a couple of thousand dollars in the end. While it might seem to sound great to "profit" $10,000 over the course of five months, most people could get a job at Wal-Mart or Target and make as much…and with MUCH less risk involved. A true investor who wants to flip homes is looking at much larger numbers in a much more compacted length of time.
That brings us to my second rule for potential property investors: "If you have to finance it, you can't afford it." As much as I would love to sell anyone a home for investment purposes, I'm never going to hold back the simple, dirty truth. Investment property should be a cash-only conversation in the current environment. There are several reasons this is true, but the biggest one is the one that should be the most obvious….if you're paying interest to the bank, they're the only ones making any money! Remember that the mortgage interest on an investment property is not tax deductible so you're going to be eating that expense. Unfortunately for most investors, that 5%-6% is the only profit they'll turn. So, unless you just happen to love your bank so much that you're willing to risk your money, time, and effort so that the bankers can reap the rewards, then investment property is not for you. Harsh, I know, but entirely true.
Now, if you've read to this point and not given up on me, you're probably going to be a member of the real target audience here…the cash investor. For the person who has liquid assets (cash, IRA's, CD's, etc), today's real estate market is an absolute bargain and profit-producing machine. Cash is king and that expression has never been truer than it is today. The return on investment (ROI) for a cash buyer in the current economic climate is almost guaranteed with the proper level of investigation and research.
Click here [http://www.pan-realty.com/articles/buyers/breaking-down-investment-property] to read the rest of the article at Pan-Realty.com
All too often a new or former client of mine will pop up and ask about investment property. They have stars in their eyes after watching Vanilla Ice "flip" homes on HGTV. After all, if the genius who gave us "Ice, Ice, Baby" can do it, why can't they? OK, maybe that's an extreme example, but you get my point. It is simply not as easy as it seems to buy a house, fix it up, and then sell it quickly and for a reasonable profit. Can it be done? It absolutely can. It's just not as easy as television would have you believe.
My number one rule of investment property is: "Do not create a job for yourself." Many people ask what I mean by that statement, but it's really pretty simple. I don't want any of my clients going out and buying homes that are going to tie them to the property for months on end doing renovations and repairs that will net them a couple of thousand dollars in the end. While it might seem to sound great to "profit" $10,000 over the course of five months, most people could get a job at Wal-Mart or Target and make as much…and with MUCH less risk involved. A true investor who wants to flip homes is looking at much larger numbers in a much more compacted length of time.
That brings us to my second rule for potential property investors: "If you have to finance it, you can't afford it." As much as I would love to sell anyone a home for investment purposes, I'm never going to hold back the simple, dirty truth. Investment property should be a cash-only conversation in the current environment. There are several reasons this is true, but the biggest one is the one that should be the most obvious….if you're paying interest to the bank, they're the only ones making any money! Remember that the mortgage interest on an investment property is not tax deductible so you're going to be eating that expense. Unfortunately for most investors, that 5%-6% is the only profit they'll turn. So, unless you just happen to love your bank so much that you're willing to risk your money, time, and effort so that the bankers can reap the rewards, then investment property is not for you. Harsh, I know, but entirely true.
Now, if you've read to this point and not given up on me, you're probably going to be a member of the real target audience here…the cash investor. For the person who has liquid assets (cash, IRA's, CD's, etc), today's real estate market is an absolute bargain and profit-producing machine. Cash is king and that expression has never been truer than it is today. The return on investment (ROI) for a cash buyer in the current economic climate is almost guaranteed with the proper level of investigation and research.
Click here [http://www.pan-realty.com/articles/buyers/breaking-down-investment-property] to read the rest of the article at Pan-Realty.com
