Interview Your Prospective Agent–The RIGHT QUESTIONS!

Interview Your Prospective Agent–THE RIGHT QUESTIONS! If you have made the decision to list your property with a real estate agent you’re are one-step closer to the sale of your property…but don’t walk too fast—deciding to list is one thing…picking the right agent is another.

It is crucial that you ensure that you are picking the agent that is best suited to meet your needs. Many people choose a friend that happens to hold a real estate license–but have another primary occupation. That is a huge mistake and, typically, the end of a good friendship.

When choosing an agent keep your eyes and ears open to what other people have to say about their experiences with a particular agent. Look in local real estate magazines and see who seems to specialize in home that sell with in the price range of your home. And most importantly, do not forget to interview several top agents, and pick the one you feel most comfortable with.

So many homeowners are timid when it comes to interviewing agents–in fact, they think the agent is interviewing them–that is not true! You are the employer, they are the employee–you call the shots.

Here are some questions I feel should assist you in finding the right agent:

  1. How long have you been selling residential real estate? Try to find an agent that has been in full-time practice with the same firm for three years. I recommend the same firm because successful agents do not hop from firm-to-firm–the only exception would be if they left a firm to open their own.

Agents that hop around do so because they were not getting the business they expected –I have news for them–it is usually not the firm, it is the agent! Avoid them.

  1. Do you work full-time? As mentioned above–no part-timers.
  2. How often will you communicate with me? A common problem with listing agents is that they take a listing and the homeowner never hears from them again. The agent explains to the homeowner that they were too busy trying to sell their home–hogwash! An agent must be willing to guarantee you that they will communicate with you atleast every ten days.
  3. Are you a member of the local Multiple Listing Service? Be sure that your agent is a member of the local MLS service–this places your property information at the fingertips of all of the agent-members in the community. It is an essential marketing tool.

Reasons for Making a Spanish Will: Protecting Beneficiaries When Owning Real Estate in Spain

Spanish inheritance law is decidedly different from the laws of the US and the UK.

  • Children have a statutory right called legitima to a big part of the estate. They cannot be disinherited or excluded except in very rare circumstances.
  • Surviving spouses do not automatically inherit the holiday home foreigners often purchase in Spain.
  • Spanish wills are drawn up in a different form and probate can get very complicated.

Overview of Spanish Inheritance Law

Children have a very strong position in Spanish inheritance law. The basic rules and laws are contained in the Codigo Civil, which came into force in 1889 iand is still applicable in the modernised version.

It gives children a compulsory right to the biggest part of the estate of a deceased parent. This right can only be taken away from them and their legitima be overruled, if the child in question has committed a serious criminal offence against the parent such as armed robbery or a murder attempt. It can easily be seen, that such cases will be very rare.

Likewise, the surviving spouse has a right only to part of the estate together with the children. A foreign property owner who has for instance acquired a holiday villa or apartment, often in joined names with a spouse, may wish that the property goes straight to the surviving spouse and not to the children. The only way to achieve this is to make a Spanish will.

How to Make a Spanish Will

Spanish law does recognise a hand-written will, but the formalities are very strict and a foreigner will not know about them. Additionally there is the problem of language, witnesses and, in the case of demise, how the handwritten will can be probated. This involves the court, translators and often legal experts, which alone shows the problems, costs and time the probate of such a will requires.

The best and easiest way to ensure that a valid Spanish will which reflects the wishes of the testator and complies with Spanish law is to make a testamento abierto before a Spanish notary public. The notary public plays an important role in Spanish legal life, not only with the acquisition of a Spanish property but also with the making of a valid will and its execution.

In practice, the Spanish lawyer will meet with the client, draft the will and then present it to the notary where the document will be checked, copied onto numbered paper and executed in the presence of the notary and the necessary witnesses whom the notary will often provide.

A valid Spanish will, executed in this form, will include the crucial clause that the testator has taken care of the legitima in a separate will made in the country of origin and that the Spanish will is restricted to his or her Spanish assets, be they real estate, chattels or money in the bank. The will is written in two columns, one in Spanish and the other in the testator language and an interpreter will be present and confirm a valid translation with his signature.

The notarial will has the added advantage that the notary will lodge a copy with the Registro Central de Ultimas Voluntades in Madrid.

Probate Procedure In Spain

Any probate procedure starts with the application for a certificate from the above register to see, if the testator has made a will. The notarial testament will of course show up and the beneficiaries can proceed with their probate without delay. Again, this is done by the notary in what’s called Escritura de Acceptacion y Adjudicacion de Herencia. Once this document has been executed and death duty, if applicable, has been paid, the beneficiary will be registered as the new owner in the appropriate land registry.

The foreign will has no bearing on this procedure and probate will be dealt with in the deceased’s country of origin.

Considering the problems which can occur, not to mention the time and possible costs, it makes great sense and gives every foreigner owning property in Spain peace of mind to make the effort and pay the small fees to execute a valid Spanish will at a notary’s office.

investment

Investment Fundamentals in Real Estate

News outlets constantly report on jobs, housing prices, housing inventory and a myriad of other factors that affect the residential real estate market. With every data point it seems like the stock market moves up and down in a ratcheted fashion as if the latest data point has solidified the recovery or the doom of the market. Smart investors would be wise to look at trends and to always remember, real estate at its core is an investment in a location.

Investment Fundamentals – Jobs and the Economy

Jobs and retail sales can be a good barometer of the national economy. If people are employed and spending money, it is generally a good bet that the economy is doing well. This is a positive sign for real estate, but here is where the local part comes in. Cities like Detroit and Cleveland know all too well that they are not represented by national statistics.

This is not to say that national statistics do not affect the way people think, act and feel locally, but investors are best served by knowing how their markets trend with the broad nation. Recoveries in cities like Los Angeles and New York will be leading indicators, while second tier cities like Chicago might be several quarters behind.

Furthermore, the speed of recoveries also depend on the fundamental (or lack thereof) reason for the initial inflation. Consider a city like Las Vegas. This city began to see economic gains because of increased tourism; however, as the local economy begin to pick up steam, construction quickly became the growth engine. With the construction enormous casinos and the real estate development boom, Las Vegas became a city of physical labors. Even as tourism began to dip, the city continued to prosper because of this false economy.

Finally, disaster struck when many casino projects were cancelled and the local residential real estate market crashed. With no more construction jobs, the emigration began in earnest, leaving the economy short of people and jobs. Even as tourism returns, the residential market in Las Vegas should expect a much slower recovery than the greater economy because of its unprecedented rise.

Investment In Local Real Estate Fundamentals

Investors can profit from understanding the disconnect between market realities and market perceptions. Becoming familiar with the real estate drivers of a local market can help an investor understand when it’s time to buy and when it’s time to sell. Even today, markets like Houston show strong fundamentals and did not suffer from the same drop as other major markets. Growth in this market may be unduly muted because of general economic trends. Local investors would do well to invest today and wait for the market to validate their conviction.

Don’t be swayed by national real estate statistics. Real estate is 100% local. Use this knowledge to profit from local mis-pricing when the greater economy becomes too hot or too cold.

real estate

Real Estate: Another Way To Get Rich

Property options are one tool in the real estate investor’s toolbox which is an amazingly powerful way to control property without actually having to pay for it. Sure, a small payment is made and a contractual agreement is reached. However, in essence, if you have an option over a piece of real estate, you have more control over it than the registered owner of it.

Real Estate Is A Fickle Mistress

Real estate options have been used widely in the past, but surprisingly sparingly these days, probably because most people don’t know how it works, and find the whole process a bit too difficult. That’s a bit of a disappointment because they can be a great way for real estate investors to expand their portfolio, and build their wealth. That’s why I learned how it works, because I saw the potential and I got a little excited.

Let’s say for example you come across a property that’s a little run down in an area that’s experiencing decent population growth. Since the owners bought the house a decade ago, real estate prices have not quite doubled in the area. After talking to the couple you learn that they would like to sell really because they need the money, but are a bit fearful of the process and what price they might get for the property. You decide that you might like to buy the property, and that it has the potential to rise further in value. So you buy an option over the property – you pay them say $2,000 today in exchange for the right to buy the property at a set predetermined price (say $250,000) in the future (say the next 2 years).

Selling A Property You Don’t Own?

The best thing about options is that the terms are totally negotiable between the parties. The time limit to expiry of the option may be different – as may the dollar figure, but the principle remains the same. You now control that property and it cannot be sold while you hold that option. So this allows you to then go and seek out a buyer for the property and sell it. But how does that work – how can you sell the property if you don’t actually own it? Easy!

Say six months later you find a buyer for the property – and you negotiate a price of say $300,000 for the property. Great! You hold the option over the property right, so you tell the owners, it’s time to go, this is what’s happening, I’ve found a buyer, isn’t that great! They’re happy because they have the $2,000 you paid them for the option, plus you give them the set price for the property, being $250,000. They’ve made a tidy sum in capital gains over the period they’ve owned it. You’re happy too, because you get the $300,000 from the buyers! Deduct the $250,000 you give the owners and the $2,000 for the option, that’s a profit of $48,000 in 6 months!

Real estate options can and do work for many real estate investors and businesses, but you must be sure of the laws in your own state or territory. This is one of those investment areas where it makes good sense to lean on your team a bit. Use your lawyer to draw up the contracts and real estate contacts to source out buyers and sellers. Sometimes you’re just the person to marry them up – for an option and a fee of course. Enjoy!

degree

Degree Programs in Real Estate: Ranking The Best

Each year, U.S. News & World Report relies on surveys of business school deans and senior faculty to determine the top business schools in the nation, both overall and in a variety of specialties. Students looking to train for careers and obtain a degree in Real Estate should consider business schools at the University of Pennsylvania, the University of Wisconsin, and the University of California at Berkeley, the top three schools according to U.S. News & World Report’s most recent rankings.

Degree From University of Pennsylvania

The University of Pennsylvania’s Wharton School of Business consistently ranks at or near the top of several U.S. News & World Report ranking lists of business specialties, with the Wharton school earning the top spot among business schools overall. Business school deans and senior faculty have ranked the Wharton Real Estate program as the best in the nation.

Real estate is one of 21 concentrations Wharton students may choose to pursue while studying for the standard undergraduate degree of a Bachelor of Science in Economics. The Real Estate concentration consists of two required classes (Real Estate Law and Real Estate Investment: Analysis and Financing) and two electives, chosen from among courses such as Urban Fiscal Policy and International Housing Comparisons.

Degree From University of Wisconsin

Ranked 13th in the nation overall among business programs rated by U.S. News, the School of Business at the University of Wisconsin-Madison takes the second spot among Real Estate programs. Real Estate is one of 10 majors offered by the Wisconsin School of Business.

The Real Estate major at Wisconsin consists of six required courses, beginning with The Real Estate Process (a course which serves as a prerequisite for most other courses in the major) and ending with a capstone course in Residential Property Development. The department also recommends additional electives in Real Estate in addition to electives in such fields as Finance, Environmental Studies, Soil Sciences, and Civil Engineering.

Degree From University of California at Berkeley

U.S. News surveys place the University of California at Berkeley’s Haas School of Business third among undergraduate Real Estate programs. The Haas School is also ranked third overall among business schools.

All Haas undergraduates take courses towards a Bachelor of Science, and while the program does not have explicit majors, concentrations, or specialties, a flexible upper-division elective program allows students to gain a substantive background in the field of Real Estate. Students can take courses in Real Estate and Urban Land Economics, Valuation of Real Property, Real Estate Finance and Legal Aspects of Real Estate, as well as a special topics course.

Whether interested in a business field or something else, choosing the right college can be one of the most difficult decisions a student will make. Prospective undergraduates and their parents should be proactive regarding the college search, reading information from publications (such as U.S. News, Forbes, Bloomberg and others) that rank colleges and programs and then investigating schools on their own by exploring websites and arranging campus visits. Through careful research, students can find the right school for them based on their interests and career goals.

Making Money By Selling Your Real Estate On Contract

In this article we will be looking at selling your property on contract for deed.

Purchasing on contract is not new to the real estate industry. It’s yet another creative method of structuring a win-win situation for both you and the prospective buyer. Now let’s look at an explanation of a traditional real estate contract and a contract for deed transaction.

Traditional real estate transaction

In a traditional real estate transaction the buyer deposits earnest money and a contract to purchase the property is executed between the buyer and the seller. Within the body of the contract the terms and conditions of the transaction are outlined. This includes key points such as purchase price, closing date and financing information.

The financing information that’s included is the down payment amount, interest rate the buyer is seeking and the term of the mortgage (typically 30 years). A pre-qualification or pre-approval letter from a bank or mortgage company usually accompanies the contract. The traditional method obviously allows the bank or mortgage company to finance the purchase for the buyer.

Contract for deed real estate transaction

With a contract for deed purchase everything works exactly the same as the traditional purchase with one exception. The one exception is a big one, so lean in and read closer. The seller actually acts as the bank and finances the real estate for the buyer. Again, the contract is pretty much the same. However, the financing terms and conditions apply directly to you. The downpayment would be paid to you along with the monthly mortgage payments.

I can hear you saying, why would I do something like this? I’m not looking to play banker, nor am I not looking to play banker for 30 years. Let’s re-focus, remember that our goal is to make money in real estate right now! This is yet another method to do just that. Let me put your mind as ease. You are not financing the property for 30 years. You are simply providing interim financing.

This interim financing combined with the buyer building or reestablishing their credit and financial situation will allow them to obtain a mortgage from a bank or lending institution and refinance at the end of the contract period. This refinancing will cash you out and transfer title to the buyer.

During the term of the contract for deed the buyer is responsible for the mortgage payment to you, 1/12 of the annual real estate taxes, homeowner’s insurance and maintenance and upkeep of the property. The key points of structuring a win-win contract for deed situation are as follows:

Purchase price

Your purchase price should be in line with similar properties that have sold within the area, with the area being no more than 8 blocks in any direction. I’d suggest pricing your property in the middle of the selling range for your area. This allows for changes in the market, both upward and down. It also makes your property more marketable.

Please remember that you can ask and may even get whatever you want for your property right now. However, at the end of your contract for deed term, your property will need to be appraised by the lender for the original agreed upon contract price. Do your homework.

Downpayment

The downpayment you request is up to you. Generally speaking the type of buyer that is looking to purchase on contract has credit issues of some sort. That can range from non-existent to very bad. Call some banks and mortgage companies to get some ideas of the downpayments they are requiring.

Rate

The interest rate is also up too you. However, I’d also suggest checking banks and mortgage companies to get ideas. Also make sure you check your states usury laws (if applicable) to make sure you don’t exceed legal limits. Again, the type of buyer that you will be financing will more than likely expect a higher rate given their credit situation.

Term

The term is very, very, very important. Did I mention that it’s important? This establishes how long the perspective buyer will have to execute the contract for deed. Once you have someone that’s interested in your property you should meet with them and map out a plan. This plan should basically address how they plan on becoming a ready and able buyer.

It also should include how long it will take. It’s crucial for the buyers to be realistic and know what they are capable of. A two to five year contract for deed is plenty of time for someone to turn around their financial situation and make the purchase.

Exit/escape clause

This section is just as important as the term section. We all want things to work out. But unfortunately things don’t always go according to plan. The exit/escape clause spells out how both you and the buyer will handle a default in the contract for deed. This section will cover things like not maintaining homeowner’s insurance, late payments and not being able to obtain a mortgage at the end of the term.

You may be asking, where do I get the contract for deed? A good place to start is with a local real estate agent. The contract for deed forms are usually in our file cabinets or on our hard drives. You can also search online and find an acceptable form fill version from more than a few websites. As I always suggest, if you’re not comfortable with working with the forms yourself, seek legal advice.

Selling a property on contract for deed can be a mutually beneficial method to for both buyer and seller. I’ve personally used it to sell and purchase property with success. Investing in real estate can be challenging in today’s market.

But please remember, it’s the basics that keep us in business during the hard times. I hope that you’ve enjoyed reading this short series as much as I’ve enjoyed writing it. My job is to keep you in the real estate know.

Avky Inc – Using an Agent to Buy Foreclosed Properties

The easiest way to find foreclosed or defaulted properties for sale by banks is to go through a real estate agent familiar with that market. Some real estate agents specialize in foreclosure sales or short sales. These are two very different transactions. In a foreclosure sale, the bank owns the property and sales that property as-is. In a short sale, the seller owns the property, but owes the bank more than the property is currently worth. Both offer opportunities to purchase good investment properties at a discount. This is a guest post by the co-founders of Avky Inc, Kyle Uchitel and Aleksandr Vasser.

Avky Inc Goes Into Foreclosure Sales

Banks do not want to own real estate. With that in mind, banks employee a variety of people to get rid of the foreclosed properties they come into ownership of. While many of these people are employees of the bank, they also publish lists directly to realtors. In these challenging economic times every realtor will claim to be an expert in foreclosure sales. Buyers should still be careful. It takes experience and patience to work with banks in a sale, so not all real estate agents are created equal. Remember, even though the buyer may not pay commission, that pay is implicitly applied to the purchase price of the property. Good investors get their money’s worth from their agent.

When considering an agent, a buyer should specifically set out their criteria and then interview them based on those criteria. When considering foreclosures, a realtor should have handled multiple transactions before. They should have worked with investors in the past and have experience working with a variety of banks. They should also be able to recommend other good professionals to help the buyer through the transaction. It will be important to have a good understanding of the liens on the property, as well as an major issues. The buyer is purchasing the property “as-is” and will be required to pay off some liens before claim title to the property.

Short Sales

Short sales are significantly harder than simply buying foreclosed investment properties. Bank will have to record a loss on their books when they complete the short sale transaction. Because of this, banks will try their best to maximize their value. Borrowers will need to show true hardship through a myriad of documentation and the bank will have to genuinely feel like a default will be imminent if they are not able to close the sale.

Once that hurdle is reached, the buyer must be vetted. The bank will want to be sure that the sale can close. A good real estate agent must be very familiar with the paperwork required by the bank and must be very organized. Additionally, they will need to follow up with the bank often and be patient. While buyers can certainly find good deals in short sales, they will need to be patient as the process can take two to six months.

A great agent will earn their fee and then some in these highly specialized transactions. Don’t be afraid to interview multiple agents until the right one presents himself/herself. Realtors can also be great for sourcing these deals. Be patient and a good investment just might present itself.

Avky Inc and it’s co-founders can be reached on Twitter via the following links:

Avky Inc: @avkyinc | Kyle Uchitel: @kyleuchitel | Aleksandr Vasser: @aleksandrvass1

aleksandr vasser

Aleksandr Vasser Explains Real Estate Sunk Costs

Unrealistic sellers cost everyone time and money. Their agents list their properties to only lose the listing after six months without a transaction. The seller must constantly deal with showing their home any time of day or night. This is a guest post by the other Avky Inc co-founder, Aleksandr Vasser. Aleksandr Vasser lives in booming Phoenix, Arizona.

Buyers waste countless minutes touring and bidding on a home that will never actually sell, or, more accurately, be sold. Why? Sellers often don’t understand the concept of sunk costs.

Aleksandr Vasser Explains Real Estate Sunk Costs

Sunk costs can be defined as dollars that have already been spent on a good (real estate) that cannot be recovered. When buyers purchase their home, they put a certain amount of money down. In practice, this money goes to the seller and can never be recovered by the buyer. Unfortunately, too many buyers anchor on the moment they hand over the very large check.

Fast forward two years into the future and a 20% – 40% decline in value later, the buyer now becomes the seller. Rather than simply looking at the market price, adjusting for the pluses and minuses of their respective homes, and listing their home on the market, sellers think back to how much they paid for their home. Mistakenly, they feel that they should at the very least be paid the same, if not more for all of the hard work they put into the improvements.

The problem with real estate is that every investment is a sunk cost. As soon as a homeowner spends $10,000 to remodel the kitchen they create a sunk cost. They can never directly recover their $10,000 from the kitchen installer, short of physically removing the improvement. Even then, the recovery would be 50% of less than what was paid for the items.

Avoid Bad Real Estate Logic

Sellers become disconnected from the market when they focus on costs, rather than focusing on value creation. Buyers pay for the right to use a house, the surrounding land and to be a part of a community. This is the value they receive from a house. Each buyer is an individual and a buyer can buy access to a variety of homes for at a variety of price points. Buyers do not care what sellers spend on the kitchens or bathrooms, they simply what to buy the best experience at the lowest cost.

Using this basic logic, sellers should approach the process of seller their home differently. In a down market pricey renovations do not make sense. Their cost will never be recovered in the price of the home because buyers now want to pay 40% less for the home.

Since a home is simply a collection of rooms, it can easily be inferred that they essentially want to pay less for a new kitchen or bathroom or any other interesting remodel.

Listen to the Real Estate Market

Seller need to focus on beating their competition. Before doing any repairs homeowners should consider the costs and the benefits. The costs are simply the dollars spent on the repair or remodel. The benefit is either a faster sale or a sale at a higher price.

It’s easy to see the value of a higher price, but both of these have value. If a new kitchen will make the home sell one month faster, the seller will save one month of interest and taxes. The seller also avoids one month of market volatility. In a down market, the certainty of a sale can be quite valuable. For some, selling their home in 2014 vs. 2015 could have meant an extra 10% in their pocket.

Buyers should forget their purchase price as soon as they buy their home. Smart buyers will succeed by listening to the market. Perform repairs and renovations that will increase the price of the value of the home more than their costs, but also consider renovations that will make the home sell faster. The bottom line is always focus on the market.

Aleksandr Vasser can be reached for questions on Twitter at @aleksandrvass1.

kyle uchitel

Kyle Uchitel Presents: Real Estate Due Diligence

Due diligence is the thorough research, confirmation, and evaluation of the relevant data, projections, and representations about a property. Some real estate investors who are just starting out may not have much money or time. However, they will regret not spending a sufficient amount of both on due diligence before committing to buying particular properties. The following is a guest post by Phoenix area entrepreneur Kyle Uchitel. Kyle Uchitel is a co-founder of Avky Inc.

Kyle Uchitel: Investment Plans, Operating Expenses, and Other Factors

These are some of the pre-contract due diligence measures by investors who want to succeed. Depending on the type of property or financing involved, investors may have to take additional or different steps.

  • Create a real estate investment plan that is clear about the investor’s goals, the investment strategies that will be used to reach those goals (for example, build a portfolio of five four-family homes over a 10-year period. Then pay off the mortgages on them within 15 years of purchase, etc.), and the strategies for when and how to sell off the properties in the portfolio.
  • Perform demographic research on the various areas where the investor expects to find suitable properties. Look at the research should reveal the types of people, homes, businesses, and medical, social, and community facilities that exist in the target areas. This information – which is available on the Internet, in newspapers, and from municipal authorities – will help the investor understand how much ROI to realistically expect of properties in target areas.
  • Verify information about the location, income, features, operating expenses, and physical condition of a prospective property; investors can ask to see the rent rolls of a property, can speak with the tenants on the target property and with other residents of the neighborhood, can have their real estate agent ascertain the amount of real estate taxes paid for the preceding year, and can find out whether the tenants or the owner pays for heat, water, and utilities.

Due Diligence Is Self-Protection

Due diligence is not a nuisance or a chore. It is a series of proactive steps that investors take to protect themselves from preventable surprises. The best way for investors to reduce their chance of failure is by investigating the characteristics, past performance, and future potential of a property as thoroughly as possible.

After investors do their pre-contract due diligence they are ready to look at properties and then narrow down their choices. An investor will find a property that meets the investment plan requirements. After some initial negotiation, a seller will accept the investor’s offer of a purchase price. The seller and the investor then sign a contract and anticipate the closing date. But wait – now the post-contract due diligence obligations kick in.

Kyle Uchitel can be reached via Twitter at @kyleuchitel.

financial protection

Financial Protection Advice for Real Estate Investment

From risks to rewards, real estate investment has been a boom industry and a luring attraction for countless individuals. With housing market fluctuations and financial uncertainty plaguing the market, many investors may prefer to use caution before plunging into the possibilities. Read on about financial protection for these investment options.

Although rental properties, land investment, and personal real estate ventures are commonly viewed as “safe” choices in the investment world, there are still risks involved. Several aspects of real estate ventures are often the last ones considered when a “good deal” appears on the horizon, including important details that any new investor should consider.

Real Estate Taxes and Write-Offs

When real estate properties or resale profits are at their height, the risk of real estate investment seems at its lowest point. The hazards, however, are still real and waiting to challenge investors during market tumbles and economic downturns, with unforeseen hazards from taxation and debts.

While tax incentives exist to encourage rental properties, empty houses without tenants or upkeep quickly spiral into a headache for owners. Investing time and money maintaining one or more homes can be a financial headache, especially with no tenant revenue to aid in the process.

Potential real estate hikes and property taxes also pose a problem for investors whose rental properties are now unprofitable and in some cases, in need of substantial investment to repair damage or renovate tenantless structures with dried-up rental capacity. Undesirable rental properties can spiral into money pits at worst, and break even financially at best for inexperienced real estate investors.

Financial Protection – Debts and Loans

Real estate’s risks are incurred partly from loans and invested capital involved in the process. While those investments seem like necessary hazards for reaping a profit, those decisions can become problematic when the market declines, leaving properties “under water” with dimmer prospects of future profits.

Investors must be prepared to weather rental property loan payments and property upkeep even when dreams of long-term payoff seem dim. If the property looses tenants or exceeds the owner’s monthly finances, then investors are at risk of losing it unless they enter the venture financially prepared to see it through the worst of market experiences.

“Flipping” Houses and Other Risks

The practice of “flipping” houses, or making quick real estate turnovers was a popular trend at the height of market values. While economic upswings make real estate flipping a tempting investment, the risks involved form an expensive wager beyond stock market moves.

Likewise, the cry “location, location, location” also holds sway over property values. Investors should be aware of housing trends and future projects within the rental property’s neighborhood and community, to avoid ending up with a great property whose value is erased by surrounding properties and troubling social and economic issues.

Investors who weight the risk and are still willing to take the plunge may be rewarded long-term with financial gains. A future market recovery will find many investors who have weathered the storm and acquired a few properties with significant value. Potential investors, however, must weight the risks and rewards of property investment individually before venturing capital for possible future gains. 

This has been an article about financial protection of real estate investments.