Investing In Real Estate? Read This First Before Doing Anything

Of course you do. This has been a dream that has been pitched to everyone all over the world for as long as investing in anything has existed. However, real estate is NOT for everyone and you need to take these things into consideration BEFORE you sign on the dotted line.

Here are 5 things that you need to keep in mind before investing in real estate:

1. This is not a job where you only have to work an hour per week in order to be financially free. Whether you are investing in tax liens, income property, or you are a flipper, you are going to spend a lot of time being involved with the business.

2. For many types of real estate investments, you may not be able to live anywhere you want. If you have a lot of rental properties and you want to manage them yourself, you are going to have to live near the properties for as long as you own them. If your local economy goes bad and you are having trouble finding tenants, you are going to have to pay the mortgages on those empty properties.

If the economy goes bad at the same time the houses are empty, you will have a very hard time selling the properties for anything close to what you paid for them. Real properties are not liquid assets and you need to make sure that you have a decent emergency fund to cover the vacancies or else a downturn can topple your little empire in no time.

3. Investing in paper assets (like tax lien certificates) poses less of a risk, but there still is a risk. If you buy homes through a tax sale you can get an incredible deal. However, you now own these properties free and clear. If something were to happen on the property while you own it, you could be liable and many investors do no have insurance for these transactions, buying them sight unseen.

There is a reason the property is being sold at a tax sale. Sometimes you could end up with a property that needs a huge amount of work before it can be sold. Some may be condemned. This is a transaction that requires the right team. If you are going to purchase a property from another state in which you live, you will need to have someone that you can trust locally, to go look at the property for you.

4. Tenants can be a nightmare. People that rent, no matter how good their intentions are, will never treat your property as if it is their own. You will have to constantly pay to maintain the property, whether you manage it yourself or not. Property maintenance will eat the majority of your cash flow over time, so don't get too excited about the numbers when you are figuring everything out on paper.

Your tenants can completely trash your property, and although you may have legal recourse, many times it can be close to impossible to get your money back, especially if the tenant leaves and does not tell you where they went. Finding them is completely at your expense, even to get them to appear in court. If you cannot find them, you cannot serve them with papers.

5. You cannot do this alone. No matter how many books you have read or how many courses you have purchase, you cannot be a good real estate investor without the proper team in your business. You need a lawyer, an accountant, a good real estate agent (hard to find), a property inspector, an almost expert knowledge of the market that you are buying into, and many other pieces of the pie.

Do not try to become an investor alone. This will only lead to financial disaster. You will spend way too much money and way too much time on a project, only to find that it was not a good investment.

Now that I may have painted a grim picture of real estate investing I want you to understand that real estate can be one of the best investments that you will ever make, provided that you do your homework and have the right team. If you invest in a way that fits your personality, you can make an absolute killing in real estate. However, if you invest outside of your comfort zone (ie. you become a landlord and hate dealing with people) you are going to get burned.