No doubt you would have seen several shows on the television that shows people buying properties and then reselling them again them after making minor repairs. Many people have made a tidy profit from doing this, but if you had really payed proper attention, you will frequently only see what the house could possibly make the owners. The shows often leave out when and for how much the home actually sold for.
Some of the richest people in the world first started out in the real estate business. That’s one of the reasons why that real estate investment has become so very popular. But what are some crucial things you should know before you go leaping into real estate yourself?
1. Firstly you need to know how market timing works.
This means that you need to not only gather up research on how the market cycles work, but that you also need to sit back and watch them for yourself. The truth is that property markets go up and down. But what you need to learn is when to buy. For instance buy when the market is low and then sell when it is high.
2. Acquire know how so you can to analyze real estate numbers.
You have got to be able to identify all of the factors that are going to impact upon your profit.
For example there are four vital components of real estate investing you also need to know and they are :-
1. Cash flow.
2. Appreciation.
3. Loan reduction and tax benefits. You need to fully understand how these four factors work together to produce a rate of return.
Real estate isn’t just simply making you a profit when a property appreciates in value. And it isn’t necessarily losing money when it depreciates either.
3.So get to know the economics in your area.
You have to look beyond the simple growth potential of the neighborhood you are investing in. Plus if interest rates are starting to rise upwards then you need to understand that other borrowers (Your potential property buyers) are being knocked out of the market because they cannot afford the higher repayments due to the new higher interest rates that now apply.
There are also another six aspects of economics you must also understand as well: These are mortgage interest rates, affordability indices, supply and demand, demographic information, and the job market. All will definitely impact upon the availability and pricing of property one way or another.
As you can see there is a lot that you are required to know before you leap into being a real estate investor. Sure you may be just buying and fixing up and selling one house at a time and you can have the potential to make a lot of money. But if you planning to do this as an investment then you will need to obtain the necessary education required. Otherwise all you are doing is gambling with your money and you don’t want to be doing that do you.
Chris Strudwick is a successful share trader on the Australian Stock Market Visit his weblogs at both http://www.asxnewbie.com AND http://www.aussie-retiree.com/ for more free articles and useful information about the stock market.
