Profitable Real Estate Investing Strategy*

Are you drawn to dabbling in the lucrative real estate market? Have you watched the infomercials on TV showing the Do-It-Yourselfers who purchase a home, renovate or upgrade it, then resell it for a profit that is greater than what most people make in a year?

It sure is tempting, but what are the pitfalls of real estate investment? What should a new investor know before putting their hard earned money into real estate?

There is one mantra that successful real estate investors all live by: buy low - sell high. It sounds basic and easy – and in fact, the concept is. But how can you apply this axiom to your investment strategy?

DON'T GET OVERSOLD
New investors can easily get caught up in the elements of the sale. Without experience or a background in the real estate market, you may think your instincts are good enough to guide you through, and quickly get in over your head.

Investment properties need to be undervalued, and you need to do your research first. Don't plan to buy without spending a lot of time comparing values. Your goal is to purchase an undervalued property, and this can take time to spot – especially for the inexperienced real estate investor.

The best way to determine the true value of a property is by comparing similar properties and noting the common features. These properties are called "comparables," or "comps" by professional real estate agents. The comparables must be in the same area as your target property, since the location can dramatically affect the price range.

Take note of the features and failings of each property you investigate. How long have they been on the market? What price did they sell for? What is the condition of the real estate? Once you have a good understanding of the value of properties, you will be able to tell when a property is undervalued. A piece of real estate might be undervalued because a quick sale is needed to produce cash, or maybe the seller is just inexperienced. Don't ever hesitate to barter for the best deal possible – that's part of the game.

KNOW YOUR MARKET
You're not buying real estate for yourself, such as a primary residence or vacation real estate, so you can and should spend time noting the trends in the local real estate market. You can often find useful and informative data about local real estate on the internet and in newspapers. One thing to look for is percentage of growth (in values) for various properties in the area over the past year. This is usually given in percentages.

Keep an eye on what real estate is moving quickly through the market, and what features are promoted in any new constructions. You can use this information to make your upgrades as market-friendly as possible.

Be careful not to make the mistake of renovating to your personal tastes. Use neutral color palettes, and current styles (but not trends) to appeal to the broadest buying market. Don't go too far with renovations as most buyers will want to make their own changes to the real estate.

KNOW YOUR BUDGET
The more time you spend researching all the factors of your real estate investment venture, the greater your chances of higher profits. Before you get started, know how much you can spend, the price of materials and labor, and the time frame you have to get the project completed. Once you think you have an exact figure and time – add to it, just to be sure. You don't want to get caught in the middle! The more research you do, the more accurate your budget and time lines will be.

Don't get swept away in the renovation process. Concentrate on the most profitable renovations. Kitchens and bathrooms are important. Adding French doors or updated lighting can also be a good investment. A fresh coat of paint is almost a must.

Investing in real estate is a financial business. Plan your investment like a business. Make well researched decisions. Stick to the budget!!! Don't let personal preferences get involved.

Now that you've started learning about real estate investing, you're ready to learn some more. When you think you understand it all well enough - you're ready to go out and make some money. Good luck!

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