About the Author: Sheba T. King-Simms
In life, there are only two surefire guarantees: breath and death. Still, preparing for the future does have its rewards. In fact, most aspects of life involve some degree of planning—it’s the way we, as inhabitants of 21st Century America, have been taught to exist. Financial security holds true to this grain of living now for later.
Considering the uncertain stock market, investment trusts, and 401K options, it may seem as though the safest place to store money these days is under a mattress. Yet despite appearances, the current situation is a nesting place for get-rich-quick schemes, success-in-a-few-days books, and a plethora of pyramids and chain letters promising wealth with little investment. Grandma’s old adage that anything worth having is worth waiting for is whisked away by new sayings fed even by some Christian evangelists who proclaim supernatural debt-cancellation in 2003. Such spellbinding messages can leave the average middle-class investor perplexed, suspicious, and purse-clutched. The query of the day may be simple, but it is full of meat and potatoes: will the real financial savior please stand up?
Most are privy to the recent real estate boom. There are those who have even ventured to capitalize on its benefits. Late night infomercials, such as those showcasing real estate gurus offering no money down investment property acquisition tactics often hook viewers into an initial purchase as a marketing ploy for future sales. The viewer then realizes that he or she has spent hundreds of dollars and hasn’t gained any more real estate investment knowledge than was originally obvious.
The truth is that real estate is as close to guaranteed wealth as most middle class Americans are going to get. There are profits to be had in real estate; however, one does need to know how to play the game. The Executive Intelligence Review explains in a recent article that “the cumulative value of all homes in America is now an astounding $12.04 trillion,” which is only one-third less than all the stocks traded in America. While this statistic speaks to real estate’s firm footing in the American economy, it is important to understand that the “living now for later” strategy only works when the investor plays smartly.
The danger with real estate investing is that leg-work is often underestimated. Everyone wants to stand in line at the check-cashing booth, but few commit to the working hours. When considering investment properties, make note of the following:
Consider a Partner
Many people who purchase investment properties ignore the benefits of taking on a partner. Choosing a partner should indeed be a judicial process involving credit and reference checks, and goal and character analysis, to name a few. More than one salary at stake will increase the your purchasing power, opening up many opportunities. Also, some states, such as Pennsylvania, offer liability protection and tax benefits for registered partnerships.
Take a Drive
Even if you haven’t yet applied for a mortgage or a line of credit to purchase a home, behave as though you are ready to buy. Drive around neighborhoods and areas within which you would like to purchase property, making note of the street names as you navigate.
(This leg-work will save you a lot of time during your property-hunt later.) Take inventory of the upkeep of the homes, the people, and the general ambience of the neighborhood. It may seem silly, but it speaks volumes about the area’s class structure and potential direction. Generally, if you would live there, most likely, others will too.
Take a Trip
Take a trip to the county tax assessment office. Look up the street names and find out about the real estate sales in those areas. (This information is accessible to the public and may even be available online.) Obtaining tax information is also helpful because it will help you avoid offering more money than the house (neighborhood) is worth should you decide to buy.
Consider The Fringe
Don’t be afraid to hold on to your interest to fringe areas (slightly lower-class neighborhoods). Many businesses seek out fringe areas because of the lower taxes and access to customers in the nearby high-end areas. New businesses are a sign of revitalization, which means greater stability down the road.
Multi-family Units are Tops
A good deal on a single-family unit is by no means a candidate for dismissal; however, multi-family units generally have higher positive returns than do single-family units. Consider this: a converted single-family home now stations two units. Suppose the home could rent for $600 per month in a certain area and apartments could rent for $400 per month. In this case, the duplex provides a $200 return over the single unit—and it should cost about the same!
Learn the Process
So many people miss out on potentially profitable deals in real estate because of their lack of knowledge during the mortgage loan process. Before shopping for a loan, you should know what the average interest rates are. Know your rights! Don’t get taken for a ride by lenders because you don’t understand their jargon. Do your homework.
Talk to People
This is perhaps the least adhered to rule of all. Learn from other people’s past mistakes. You may even wish to seek out individuals and companies that have real estate investments. Most homeowners and business owners who have experienced painful blows in the home-buying process can’t get to the bullhorn fast enough. You’d be surprised at what information veterans can offer.
Take your time
Beware of get-rich-quick schemes and business relationships based upon other people’s misfortunes. Ultimately, real estate is a business that generally has more long-term than short-term benefits. While short-term payoffs are replete in the business, be careful not to allow Mr. Greed to overshadow your humanity and better judgment. Listen to your skepticism, and don’t be afraid to pass up deals that don’t sit well with you. In many ways, your better judgment will keep you from making irrational business decisions. Guard your good name—your credit—with great integrity by making clear, well thought-out goals. Avoid making rash decisions in order to thwart other prospective buyers. Who cares if you miss what seems to be the deal of the century? After time, research and good judgment, you’ll find that the deal of the millennium may be right around the corner!
