Have you been watching the skyrocketing prices and see potential in the real estate for making some good money, but you aren't sure you want to have a go at it by yourself? Well that is a very real concern. Along with big profits there some comes the possibility of suffering some big losses during times like these if you aren't careful. If you want to begin investing, just remember, you don't know what you don't know. I should add right now, this is not a pitch for some high priced training. Some is good, but you won't find it here.
If you have the idea of buying a property cheap and selling it at today's inflated prices, remember that “cheap” is a relative term. Even people who own terrible places see the prices going up, and, naturally, they want their share of the prosperity. I was at an auction several years ago where the house needed quite a bit of work, including a complete heating system as someone removed the old one – including the duct work. The pros shut down when the price reached about $75K. However two women, looking for a ”bargain” ran the price up to around $130K. That is pretty close to what they place would have been worth after fixing. You have to watch what you are doing.
What the Pros Do
You Don't Have To Go It Alone
For those who aren't quite ready to jump in with both feet there are several alternatives to consider. You can look at investor groups and REITs. Each one appeals to a different type if investor depending on their financial capability, time availability, and risk aversion – to name a few factors.
With investor groups, members pool their capital and, as a group, buy, rehab and manage investment properties. There are various structures and goals. Some buy and hold properties. Some rehab and flip them. Some concentrate on commerical deals. In any case, the newcomer can get an idea of how things are done. The down side is it would take a chunk of money to join the group and memberships are not particularly liquid – but then neither is actual real estate ownership. However you may get a taste of what is involved and make contacts useful in the future.
REITs or Real Estate Investment Trusts are corporate entities that allow you to participate in major projects like shopping centers, large appartment complexes and other developments. These are exchange traded securities like stocks. This means that, while investment capital is needed, it's not necessarily as much as actually purchasing rental property but you don't have the leverage usually associated with real estate. It also means the investment is fairly liquid. The down side is that you watch it from a distance and have little if any educational participation.
Check It Out First
Before you decide on either of these it is important to do your due diligence. For investor groups ask around the investor community, which is usually means local REIAs. You may get a variety of answers – some people don't like competing against groups. However you may still get some valuable information to guide your choice. Check public records for multiple property owners, lawsuits and that sort of thing. Ask a lot of questions and don't just go by their answers, but pay close attention to the way they answer the questions. For REITs – they are publicly traded and there is plenty of information available there as well... it's required by law.
Of course neither of these is that helpful without some funds to invest. If you have little or none, try looking into some of the “buy real estate with no money down” gurus as a possible place to start. Be forewarned that it's never quite as easy as it is taught, but it can be done – you just have to look and work a little harder for the deals.
We will look at some of these concepts some time in the future. For the time being. if either of the two opportunities interests you there is plenty of information available. But be sure you look into them thoroughly before you write the check. As Ron LeGrand says: you can't lose a big check if you don't write a big check.