Sunday, January 20, 2008

Caution: Read This Before Investing In Real Estate!

Caution: Read This Before Investing in Real Estate

Many investors are hesitant about investing in this market. If you watch the news or read the paper, reports would have you believing that the sky is falling. Well, the sky falling should be the ONLY reason why you would be leery about investing in real estate. The question is not "Should I invest in real estate right now?" it's "Where do I invest in real estate right now?"

There are four key factors when deciding where to invest in real estate:

  1. Metropolitan Area

  2. Good Rental Market

  3. Low Median Price

  4. Stable Market

Let's look at each of these key factors a little closer.

Metropolitan Area

A metropolitan area offers a wide variety of possible tenants. The last thing you want is a great VACANT property. Small towns often only have one source of employment. If that company closes, so does your rental market. Larger areas also offer a great selection of property management companies so if you are to busy to play landlord you have options.

Good Rental Market

A good rental market has single family homes that keep up with or surpass the amount of the mortgage payment. This does not mean that a property with a temporary negative cash flow doesn't still make a good investment in the long run.

Low Median Price

You want to purchase most of your investment properties in the median range. This should keep you mortgage payment below what you can reasonably ask for in rent. You also want to avoid jumbo loans. Jumbo loans ask investors to put down 25% on non-owner occupied homes. This can tie up to much of your cash that you could be using for another investment.

Stable Market

Believe it or not you don't want to invest in a booming market. During a booming market, there are many offers being made on one property. You have to compete with to many buyers. This drives up the prices for the houses and you don't get the best deals. You want to buy in an area that simply has a steady rise in market prices. It doesn't have to be rapid.

Blessing to Your Real Estate Investing,

Valarie Jacobs

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