Basics to Real Estate Investing

Basics to Real Estate Investing

 

  With interest rates being so low, putting your money to work at the bank just doesn’t provide the desired return.  The uncertainty and recent decline in the stock market makes such investments risky, and to employ a broker with quality knowledge is expensive per trade.  Real Estate is the other common alternative.

  Today, you can’t turn on the radio or television without hearing someone advertise about their program for easy real estate investment with little or no money down.  I wish it was really that simple. The plain truth is that it is not easy or simple, and if it were, those same people would not be selling their program.  They would be sitting on their private island counting their money.

But don’t let me discourage you completely because I confidently believe real estate is one of the best available investments.  Why do I believe this?  

                                     Let me give you four core reasons:

•             Real Estate is finite.  Meaning, we cannot make any more land, so the supply is limited.
•             Demand is constant.  It fluctuates for sure due to the current economic conditions, but there is always demand.
•              Values for the most part always appreciate.  Like all things, they go up and down, but historically speaking land values ultimately only go in one direction.
•              Real Estate has utility.  You can use it unlike a stock or bond.

  So what do you really need to know to be a successful investor?  First you need a plan. Second, you need capital to support you investment.  Third, you need experts, and I would recommend a seasoned Realtor, a trusted lender and a qualified contractor.

 

The Plan – Your plan has to have both an entry strategy and an exit strategy.  Most failures occur due to not following the entry strategy, and not having an exit strategy. By the way, buy low and sell high is not a plan. 

  Any investment plan revolves around the capital available to invest.  You must anticipate all costs associated with the investment.  Down payment, insurance, taxes including income taxes on profits, repairs and maintenance, association dues, city and county permits, selling and closing costs. 

  

Each investment has to have a timeline.  House flippers typically do not account for delays to their timelines, and wind up making no return or even losing the investment entirely.  Your timeline has to be practical, and it must account for unexpected delays.  If there is no margin for error, there will be no profit in the end.

An exit strategy is the way you will realize your return.  The obvious answer is to sell for a profit, but a good strategy has a contingency plan such as rental income.  So during the investment evaluation process, the investment must be able to cash flow as an income producing rental property.

This article scratches at the basics of real estate investing which is a personal passion of mine.  I have been at it for over 20 years, and I still don’t have all the answers.  I do encourage those interested to jump in, and I enjoy assisting my clients in establishing their own person investment plans.  

So, if you have been considering becoming a real estate investor, let’s schedule a meeting. I won’t tell you it is easy.  I won’t promise that you will soon be a millionaire, but I will help make sure you have made the best investment decisions based on your plan and capital, and I will be with you every step of the way.

Bill Barkley, President and Broker of  River Valley Real Estate
19202 Huebner Rd, Suite 100 San Antonio, TX 78258
210-853-5327
www.rivervalleyre.com