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HOW
TO ELIMINATE THE RISK OF REAL ESTATE INVESTMENT!
Avoid 12Common mistakes made by novice investors
and ensure high rates of return!
Compliments of:
Linda Christianson
Real estate investment has provided many
investors with positive cash flow, tax benefits and satisfaction of
making an impact in others lives. Like any investment however, real
estate has intricate nuances and market trends that when ignored can
cause an investor tremendous heartache.
Unbelievably many
first time investors are willing to part with their hard earned cash
without taking the time to study their investment. They rely on
traditional trends and gut feelings. Before you risk your investment
take the time to learn all you can about your market. By aligning
yourself with the right professional you can avoid these 12 common
mistakes and you’ll ensure an excellent return on your investment.
1. Failure to Determine Your Time Need-
Cash flow, capital appreciation, tax
benefits, loss of management, equity pay down and pride of ownership are
just some of the things that need to be addressed before you make that
investment. A service minded real estate professional can be a
tremendous asset by taking the time to evaluate your needs and making
sure you’ve got all your bases covered.
2. Not Checking out the Seller or Sellers Agents Numbers-
Claims of extremely high rates of return run rampant in real estate
investment. Don’t get caught up in the excitement - check everything:
rents, payment history, taxes, expenses, deposits, future
modifications... everything. Make sure you have the right agent...it’s
like having a good insurance policy against overlooking all the
seemingly insignificant but very important details.
3. Forgetting You Are Buying a Business-
Owning investment property carries with it a great potential for
creating wealth and... some potentially difficult decisions. Evictions,
re-investment into the property and time management all need careful
consideration. Remember this is not a ‘hands off’ business.
4. Avoid Negative Cash Flow-
Property that eats cash every month can
drain your working capital. This can create stress, frustration and
become quite painful. Predicting constant appreciation is extremely
difficult if not impossible for the unseasoned investor. A strain on
your cash flow may cause you to sell the investment before the benefits
of ownership are ever realized.
5.
Failure to do a Thorough Inspection- Look under every rock! Hire a
professional inspector. Ask the tenants about pest problems, structural
damage or reoccurring problems. Don’t overlook anything! A value
driven real estate professional will help you find the right inspector
and can help you avoid costly mistakes. When investing your hard earned
money be sure and use sound business judgment!
6. Failing to Have Adequate Insurance-
Investment property brings liability.
Tenants, cars, parking lots, cleaning facilities, property liability -
the list is quite extensive. Adequate insurance coverage is an absolute
must! Be sure to consult with an insurance professional and protect
your hard earned assets.
7. Inspect, Approve, and Confirm All Documents-
The list of documents that need to be
proofed can be overwhelming to the first time investor. Building
permits, zoning laws, rental and lease applications, health licenses,
laundry leases, underlying loan documents, CC&R’s, by-laws, title
policies, mineral leases, inspection reports, purchase contracts,
insurance.. don’t attempt to do it alone. The right professional can
remove most of the stress and bring the transaction to a conclusion
smoothly.
8. Get a Bill of Sale For All Property Involved-
Many types of personal property
(appliances, furniture, fixtures, etc.) can be involved in an investment
sale. Be very detailed -know who owns what!
9. Charge Fair Rents-
Vacancies, turnovers and lease terminators are your biggest expense.
Charge fair rents, treat your tenants with respect and respond as
quickly as possible to their needs. It’s a lot less costly in the long
run to take care of the little problems before they become big
problems. Vacant property is your Achilles heel.
10. Select Qualified, Good Tenants From the Start-
Take the time to check references.
Previous landlords, employers, financial references, credit and
judgments are all vitally important. If there are any questions do a
thorough investigation. Drive by their previous residence. A little
work up front can save tremendous problems later.
11. Make Sure You Get Estoppel Letters-
Get letters from tenants confirming the status of tenancy. Make sure
their version of the rental or lease agreement corresponds with the
sellers interpretation.
12. Don’t Spend Positive Cash Flow-
Most of successful investors have free
and clear properties. Be sure to re-invest your cash flow back into the
property payment and speed up the amortization schedule. This decreases
your debt load and increases your equity which builds your net worth.
Investment property can be one of the most rewarding aspects of your
financial portfolio. Be certain to have all your ducks in a row before
you invest. Do your homework! Consult with a professional real estate
agent and protect yourself from the hidden troubles that can plague
first time investors.
I hope
this brief report has been of value to you. It is my ultimate desire to
help you achieve your real estate investment goals and provide you with
the most professional, efficient and effective service possible!
If you
would like more information, or copies of my other reports published on
topics such as “Sellers Beware!” or “Ten Questions You Must Ask a
Realtor before you List Or….You Could Lose Big!”, please call me at my
Edina Realty Office, 218-829-3610, or 800-250-9701. May this report be
of value to you in increasing the timeliness and profitability of the
sale of your home.
Ext. # 5018
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