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People Say All Kinds of Things About Real Estate – Who Can You Really Trust?

by Karen Margrave on July 16, 2014 · 6 comments

  
People Say All Kinds of Things About Real Estate - Who Can You Really Trust?

You turn on the television on any given night and there’s shows about flipping houses.

On the weekends, there’s infomercials, seminars at a local hotel, etc. telling us about how much money is being made flipping, remodeling, selling houses! HURRY!! DON’T WAIT, GET IN NOW!!

Related: Start Here! Real Estate Investors, Buyers, Developers or ….

I am on BP every day, and I can tell you that I read posts all the time from people who have been watching those television shows, reading all the posts, listening to the podcasts, downloading the free information, buying books etc., ALL of them with one focus, to figure out what they need to do to get a piece of the pie, and set themselves up so they never have to “work” again!

First off, finding your way here, to Biggerpockets, was a good start. There’s no other site on the internet like it. You can get FREE information all day long, from people who have years of experience investing in all types of real estate, and related businesses. To top it off, the advice is given in basically “real time”, it’s incredible!

However; don’t be deceived, though by and large the members on BP are good, honest, people wanting to learn more themselves, or willing to give of their time and experience to help others, there are also a very limited few that are a little more self centered.

There are also well-meaning members that have been in this business for a short time, and have had some great success, and believe they have THE answer, THE niche, THE secret to getting rich in real estate, and want to share it with you.

The Truth

The TRUTH is, real estate hasn’t changed.

Yes, the crash brought some unprecedented circumstances that flooded the market with huge numbers of foreclosed properties.

Suddenly there were opportunities for smaller investors to jump in on the market and buy properties to fix/flip or buy/hold, etc., and many people have made A LOT of money in the process. However; the fundamentals of investing in real estate are still the same, and here are some things to consider, though not complete.

  • Buy low, sell high
  • LOCATION, LOCATION, LOCATION (Value is based on supply and demand) Good locations create demand, with low supply, values rise) However; understanding where the demand comes from and how stable that demand will be long-term is key. Is there a temporary influx etc.?
  • Know your market wherever you invest!  (Sample)

o   What is the local economy based on? (Is it broad-based or dependent on 1 industry)

o   What is the average median household income?

o   Is there a demand for what you plan on using the property for?

o   What is your experience?

o   How will you manage and maintain the property?

Financing

o   Do you have the cash on your own to buy the property?

o   Will you need to get a loan? Will the property support the costs of financing?

o   Are you wanting to “partner” with someone else?

Property

o   What is the value of the property compared to others nearby? (Compare apples to apples – type of property, size house/lot, finishes, etc.)

o   If the property needs work, who will do it, and what will the cost be?

o   Once completed what will the house rent or sell for?

o   If it doesn’t sell are you prepared to keep it and rent it?

Related: Exit Strategies: How Does it All End?

The point is, there are many things to consider when purchasing real estate.  There are times when if someone gave you a property for free, you still couldn’t make a profit on it, if you have to do any work on it. Remember, “just because you can do something, doesn’t mean you should” .

You can get some top-notch information here on BP, but in the end, it’s YOU that will be responsible for paying for the property and; putting your credit and assets on the line, etc. Though someone may seem to have a lot of experience and know what they are talking about, YOU need to do your due diligence and check things out.

  • CHECK REFERENCES if you are going to partner with someone (call past clients, etc.)
  • If a  person is licensed (Real Estate and Loan Brokers, Agents, Contractors, etc.) check and make sure the license is current, if they have the required insurance, bonds, etc.
  • If you are investing in an area that you are unfamiliar with, make sure YOU have thoroughly checked it out, and are aware of the local market conditions. Don’t rely on others opinions.
  • Partnerships – Again, dig in and talk to people who have done business with the person, and find out what their experience was. Make sure you thoroughly understand exactly what is going to happen, how things will be done, etc. and MOST IMPORTANTLY, get everything down, in writing, signed by all the parties.

Investing in real estate can be very profitable, and it’s a fun way to earn money. Sometimes the most profitable deals are the ones that require the greatest gamble.

However;  no matter how big or small the deal, always mitigate the risk before moving forward by getting answer out by sharing the risk with someone else you trust, etc. or find a niche that is more secure. In the end, you have to trust yourself to make the best decision for your circumstances.

For myself I can say that we’ve done a lot of great deals over the years, in many different niches. All of our projects are built on speculation, which in itself is a risk.

However; we do our homework and make sure we are comfortable with everything before we proceed; and experience helps quite a bit.  There’s no other business that has the opportunities and diversification that real estate has, and I wouldn’t want to do anything else.

If you were just starting out, what advice do you wish someone had given you?

Be sure to leave your comments below!

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{ 6 comments… read them below or add one }

Jordan July 16, 2014 at 2:26 pm

Karen spot on with this article, so much advise out there and you have to be careful, what works for one person may not work for you

Reply

Karen Margrave July 16, 2014 at 4:14 pm

Jordan, so true. I know sometimes new investors need assurance, it’s just important that they understand in the end, it’s up to them to do their due diligence, and make the decisions that are best for them. All of us have different experience, circumstances, areas where we do business, etc. Thanks for your comment!

Reply

Shevaughn July 17, 2014 at 5:47 pm

Karen- I couldn’t agree with you more! On the topic of real estate seminars, I went to a course recently and although I learned a lot of valuable information, the bottom line was creating a cliff hanger so rookie investors like me will be pulled into believing spending thousands of dollars will guarantee success! My roots began with BiggerPockets and I will continue to refer to BP as my primary resource for information and advice!! Thanks again for the awesome article Karen!!

Reply

Ben Leybovich July 18, 2014 at 2:54 pm

Karen – Josh says that I am a violin-playing real estate investing prima-donna…A bit self-centered – no?

Great piece!

Reply

Ben July 18, 2014 at 3:05 pm

Great post! I worry about out of state investors rushing into a market and making a hasty buying decisions. This article does a good job of giving some ways that out of state investors can do their own due diligence when investing out of state.

Reply

Cory Meyer July 18, 2014 at 11:46 pm

I have seen a lot of people make mistakes over the years by following the wrong advice. Great article. I like that you talked about finding niches. That really helps when starting out. Once again, great article.

Reply

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