While real estate investing is a great line of business to get into in order to make copious piles of money there are a few things to consider before jumping into the fray. This is particularly true if you are considering going the route of a rental property owner. There are all kinds of reasons that this is a good solid investment for most that are interested in investing in the real estate business however, it doesn’t come without a few drawbacks, not all of which are financial. It would be wise to consider these things however before you buy your first rental property.

First of all, if you own rental properties and elect to manage them yourself, which is probably wise unless your first property is a multiple rental unit, you will quickly discover that your life is no longer your own. You are literally on call 24 hours a day 7 days a week to handle problems that may arise from pipes bursting, heating going out, electric issues, noxious fumes, leaky roofs and window sills and countless other complaints that may erupt at odd hours of the day or night. Your tenants will have your phone number and expect you to always take their calls.

Second, you have to play the role of Mr. or Mrs. Mean every month when the rent is due. This is probably the least tasteful task of owning rental properties for many rental property owners and one reason that many resort to the services of a property management agency above all other reasons. You will hear all manner of sob stories in your role as landlord but you need to treat this like the business even the things about your business you don’t like such as rent collecting and, when necessary, eviction proceedings.

Third, the constant need for upkeep and repair is often daunting to rental property owners. It’s a sad truth that people do not treat rental properties with the respect that they would treat a home of their own. For this reason you almost always need to paint and replace carpeting, at the very least in between tenants. This takes works and time not to mention the fact that the time that is spent painting and replacing the flooring is time that the property is going to be empty of tenants and not bringing in any income.

Finally, there is the constant need to have the property occupied. As the owner of a rental property you will need to find new tenants when the old ones leave because every day the property is empty is a day you aren’t making money. You want to have the property filled as often as possible and you really want long term tenants whenever you can manage that. One way of course is by making sure that your tenants are treated well, not overcharged, and happy with their homes.

Owning rental property can be financially rewarding but it is a lot more work than many people give it credit for being in light of other careers within the real estate investment field that may require more work upfront. Rental properties require a long-term commitment to keeping the property in good working order and making it a profitable venture for many years to come. If you are considering this business and the above things are a deterrent for you it might be a good idea to obtain the services of a property manager.

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While a good many millionaires will agree that their fortunes were made in real estate, the honest ones will also tell you that they’ve probably lost a few fortunes in real estate along the way. This is a risky business and every property purchased doesn’t always pan out to become a successful investment. There are many risks involved in real estate investing and you would be going to battle unprepared if you didn’t take a moment to carefully study these risks and work to avoid them when planning your property investment strategy.

Unfortunately, there are very few one size fits all risks for real estate investing, as each type of investing is inherently different. This means that each type of real estate investment will involve a new set of risks. Below you will find a brief overview of different styles of investing and the common risks that are involved in each.

Rental Properties

This type of investing offers some risks that are unique and some that are also risks when investing in properties that are lease-to-own or rent-to-own as well. First and foremost is the risk of failing to make a profit. If the property in question cannot achieve an adequate monthly income to cover the expenses of operating the property then it is not a solid investment.

Other risks include the risk of getting bad tenants. This is particularly hard on first time investors. Bad tenants are costly and in some cases destructive (which leads to even greater expense). Vacancies are another risk for rental properties. These properties are only costing money as they sit empty rather than earning money as they were intended. Short turnovers are in your best interest as are long-term tenants.

“Flipped” Properties

This is one of the most enjoyable types of property investments for many ‘hands on’ investors. This allows the investor to roll up his or her sleeves and take an active role in creating the masterpiece that will eventually bring in serious revenue (at least that is the hope). This is also one of the riskier investments, particularly when trying to turn a profit in what is known as a buyer’s market.

The risks are simple but often overlooked and they can have a significant impact on the overall success or failure of the project. First of all, the biggest risk is in paying too much for the property. Other risks include underestimating the costs of repairs, over estimating the ability of the investor to do the work him or herself, taking too much time, experiencing a down turn in the housing market, making the wrong judgment call for the neighborhood, becoming overly ambitious, and getting greedy. Sometimes it is much better to walk away with a lesser profit than to end up loosing money by holding out.

Personal Residence

Keep in mind that your personal home is essentially an investment. The intention is that your home will gain in value over time and that equity in your home will build as you age. There are risks involved in this transaction as well. Buying a home that is in a ‘borderline’ area or one that is not showing obvious signs of growth is one of the biggest risks. This puts your home in the position to lose rather than gain value. This can make your home a burden rather than the investment it was intended to be. Other risks involve is becoming involved in a loan situation that is not at all beneficial (such as an adjustable rate mortgage or an unreasonable balloon payment).

Perhaps the biggest risk of all when purchasing a personal residence as an investment is failing to get a proper inspection that could rule out potentially costly and even dangerous problems within the home your purchase for you and your family. Toxic mold is one problem that comes easily to mind that most proper home inspections would almost immediately rule out. Others include structural problems that are costly to repair and dangerous to leave in disrepair. Each of these risks should be considered before an offer is made on any property.

For those seeking to turn impressive profits in short order, real estate is one way in which this can be accomplished. It is in your best interest however to be aware of the risks that are involved and take careful steps to minimize those risks. Taking these steps now may cost a little more on the front end but in many cases the pay off for doing so well outweigh the expenses.

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There are many decisions that you will need to make when investing in real estate. One of those decisions, for those handling rental properties is whether or not you need a property manager. Property managers have many uses and are a great idea for those who have many properties to handle and wish to have a life away from their real estate investing businesses. A property manager is your buffer between your tenants and your family.

The benefits of a good property management service are quite numerous. To begin with you will find that they eliminate the need for tenants to have your phone number. If you’ve dealt with rental properties before without the buffer of a property manager you are surely aware that it doesn’t matter what time of night or the morning things go wrong, you are the first person your tenants call to fix those things. A property management service is able to handle many things for you while letting you sleep through the night. It’s no small favor when you consider the multiples of tenants as you purchase more properties. A few late night phone calls and many rental property owners are almost ready to get out of the business of renting properties.

Property management services also often happen to have a qualified staff of maintenance people that can handle many of the things that go wrong with rental properties. The fee for these services may be included in your fees for the using the property management service in general or certain services may charge additional fees. Regardless your property manager or property management team is often the best source to find contractors to handle the repairs they cannot make for you as well as the repairs that they can. It’s nice to know that you won’t be getting up bleary eyed in the morning calling around for a plumber on the first exceptionally cold day of winter. Moreover it’s nice to know that someone else can deal with some of the negative things about owning rental properties.

My personal favorite reason to seek the services of a property management service is that they are qualified to handle the legalities of taking care of tenants who cannot make the rent for months on end. This is after all a business and while you can relate to the circumstances that leave some people unable to pay their rent you need the income from their property in order to make your bills. It’s much easier to leave some of the less pleasant tasks to someone else, especially if you are a softy for sob stories.

Property managers also handle the advertising for your property and the cleaning up and retouches that are necessary between tenants. They also allow you to take vacations and such filled with the knowledge that your properties and tenants are in good hands even when you aren’t there to oversee everything. Everyone needs to take a break sometimes it’s nice to know that with a reliable property manager you can actually sit back and relax while taking those breaks without worrying about all the particulars of the properties you own so far away.

If you are going to invest in real estate, this is one of the most worry free ways you can do it. The more properties you have, the more sense it makes to utilize the services of a reliable property management team.

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There are many questions that should be asked before embarking upon a career of real estate investment. The first and foremost question however should be whether or not you are truly committed to making real estate work for you. This is not a business for the faint of heart. In order to truly turn a profit you must be at times ruthless when dealing with buyers and sellers but ethical to a fault when it comes to the work that must often be done in order to get a property in sellable condition.

The reason a serious commitment is needed in order to make real estate work for you is simple. There will be ups and downs along the way. The stock market experiences rises and falls on a regular basis. Just as you cannot dump all of your stock over one bad day the same holds true even more so in the realm of real estate investing. Property values in general rise gradually over time. This means that even if the values in a community falter chances are that they will eventually recover.

Those who bank on the slow and steady growth in the value are referred to as buy and hold investors. These investors are truly committed to their investment. Some of them elect to hold the property as a vacation property while others opt to earn an income on the property by renting it out to other families or vacationers, whatever their choice may be.

This is a great way for many people to enjoy the luxury of a vacation property without absorbing all of the expenses involved in owning a vacation property as the rentals will help compensate some of the costs when the owners (investors) are not in residence. This is a fairly common practice in high demand tourist areas in which people often enjoy vacationing. These types of investors are what some people refer to as serious real estate investors though all real estate investors need to take their purchases seriously.

Those who own rental properties must also be committed to making their investments work for them. Rental properties are not a ‘hands off’ type of investment, as they will need to be maintained in order to remain in demand by tenants. You must also make constant efforts to keep these properties managed and filled along with remaining certain that you are collecting your rent each month and that the properties aren’t falling into a state of disrepair or abuse by tenants.

Many investors retain the services of property management agencies in order to handle the minutia of month-to-month details and collections. This is a great idea whether you have one lone rental property or a vast portfolio of rental properties. Even better however, is the fact that if you keep your rental properties in reasonable repair throughout the years they can become liquid assets in time. In other words, they may actually pay for themselves a few times over if you invest for the long-term rather than focusing on the moment.

No matter what type of real estate investment you intend to have it is important that you are prepared to make the commitment to profit or profitability that is necessary in order for your venture to be deemed a success.

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While homeowners are facing the crunch of the housing meltdown, investors are also facing serious repercussions as well. The housing market certainly hit is peak during 2005. A number of investors came into the market at the end of 2005 and in 2006, eying the large profits that had been made as a result of the housing boom. At the time the market was quite frenzied and some investors felt all they had to do was quickly snatch up hot profits and resell them as quickly as possible. This strategy produced quick fortunes in many cases and fueled the trend of flipping. Even people who had not had any previous experience in renovations or the real estate industry were quick to become involved.

Today that once frenzied market has begun to not only level off; however, but have completely run out steam. Investors are finding it difficult to sell properties let alone make a profit as the market continues to experience a glut of inventory. There is little doubt about the fact that the market for flipping has slowed.

Investors have also begun to lose money as a result of the housing crisis. One of the key strategies of being able to make a profit in the process of flipping is to sell the property fast enough that the investor does not need to make any mortgage payments at all or at least as few as possible. During the heyday of the housing boom this was not a problem.

An investor could easily purchase a property, rehab it in less than a month, slap a for sale sign on it and sell it before the first mortgage payment was due. Even if they sold it before the second mortgage payment was due they were still able to come out of the deal with a massive amount of profit because of rapidly rising housing prices. Today that is no longer the case.

As a result, many investors are finding that they must either live in the homes on their own or rent them out. Investors who had been renting have been forced to move out of their rental properties in some cases and live in the properties they hoped to flip. In other situations investors have been forced to rent out the properties for reduced rates in order to have at least a little money trickling in to cover mortgage payments and other expenses.

Speculators are experiencing even more problems. The main difference between flippers and speculators is that flippers frequently purchase homes, try to infuse it with some increased value through renovations and then sell it. Speculators; however, tend to purchase properties and then resell them without making any improvements at all. At one time this practice often paid off in big profits. That is not the case today. Investors who once engaged in the process of real estate speculation have discovered they must add value to the property if they are to have even a glimmer of a hope of selling it today.

As a result of the glut of homes on the market due to speculation and flipping, there are some markets that are attempting to eliminate the process all together. Some communities have placed restrictions on the abilities of buyers to resell their home within at least one year period following the date they close on their property.

Since most speculators and investors hope to sell within six months or less, this effectively prevents them from doing so. Communities that had the foresight to take this action at the height of the housing boom have been in a much better place than other communities where flipping and speculation ran rampant at the same time.

While the depressed housing market has caused many investors to step out there is little doubt that once the market corrects itself, which many believe will happen by 2010, these investors will return; poised and ready to begin reaping in the profits once again.

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It doesn’t really matter what kind of investing you are participating in, it’s almost always a wise idea to have multiple streams of income in order to maximize your profits while spreading your risks. Even within the confines of real estate investing there are different types of investing that can help you spread your risks when markets meet turbulent times and this is a very good safety net for those who do not want to feel as though they are gambling away their investments on a real estate market that is fickle on its best days.

You really have two course of action when it comes to bringing in multiple streams of income when building your financial portfolio. The first is to spread your real estate wealth and investments across several different types of real estate investments. There are a few types that come immediately to mind. First there are rental properties. You have two options even with these. You can either choose to rent properties outright to families, students, singles, and the elderly in your town or you can offer a lease or rent to own situation for those who have struggled in the past but still have the dream of home ownership.

Other options for bringing in multiple streams of income through real estate is to have a few rental properties and couple those with a few flips in the works, perhaps a commercial property or two, and a pre-construction deal or vacation condo in the pipelines. One thing is certain you should always be on the lookout for your next real estate investment if you really want to make good money in this business while having a little added security. Rentals are passive income for the most part, especially if you have a solid property manager taking care of the details and the other investments are often icing on the cake.

If you want a truly diversified portfolio however, it is a good plan to include a few investments that aren’t related to real estate investing. While I firmly believe that real estate investing is the way to go for most people there is much money that can be made in other fields and it would be pointless to discuss multiple streams of income without mentioning a few that were unrelated to real estate investing. Retirement plans are a great option and you can now invest in a retirement plan of your own even if you are self-employed. It is definitely worth considering as yet another stream of income, even if it is income that you will need to wait a while to receive. Franchise businesses are often great money makers for those who need more immediate results from their investments efforts, and stocks and bonds are also great long term investment strategies.

The truth is that there are many things you can do to create even more streams of income to add to your real estate investments. From making money online through affiliate marketing, blogs, and direct sales you can also tackle brick and mortar businesses, though these tend to be just as time consuming as real estate. The point is that you want to bring in money from different avenues and real estate investing is one of many different routes to explore when deciding on your investment future and establishing those multiple streams of income.

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You have probably read all the information on the market as it relates to real estate investing and are well aware that many of the world’s millionaires made their fortunes in the real estate market. As a result I’m sure that you feel ready to throw your hat into the ring and begin your own real estate portfolio. There is certainly nothing wrong with this as an investment strategy though there are many wrong ways in which an investor can go about the process.

Flipping properties is my field of experience and a good deal of what will be discussed here will relate to flipping properties though some of the information can be crossed over into rental properties and other types of real estate investment. Even personal property can be a real estate investment. Real estate is one of the few forms of investment in today’s society in which you can actually see the changes as they are occurring.

It is truly amazing to watch a property that was once neglected and in a state of disrepair suddenly spark back to life right before your very eyes. There is a lot of work involved in this process though and this is often overlooked. Much like labor in light of birth. The pains are quickly forgotten when looking into the face of the outcome.

Keep these things in mind for your first time and you should be well on your way to future success. You should also realize that the first few investments are learning experiences more than anything else. If you do not achieve the success you were hoping for (or success to a lesser degree than hoped) you should not give up on the dream all together simply learn from the mistakes you will make along the way as well as the mistakes that others have made.

Real estate investing is not an exact science. There is no formula in this business that guarantees success. Even seasoned professionals will find the occasional bump in the road even on a property for which they had high expectations. Stuff happens along the way that cost money, delay the project, or set the project back. These things are stumbling blocks no doubt but should not be allowed to derail the entire project. When these things happens go back to your original plan, reassess the situation and create a new plan with the necessary adjustments in mind. The key is in sticking to a plan the entire time and never throwing the plan out the window and flying by the seat of your pants.

Your plan will be your lifeline throughout the project. You need to have a plan and a budget in writing. One great rule of thumb is that you set aside double the amount of money you plan for in your budget. This gives you a bit of a safety net for the inevitable things that will go wrong. Things will go wrong on almost every flip you encounter. Even the seasoned professionals that have television shows about their flipping efforts encounter problems in almost every single flip, rehab, or renovation.

For your first few investment purchases it is recommended that you purchase properties that need little more than minor cosmetic repair rather than complete rehabs or renovations. This allows you to get your feet wet without the incredible risk of going off the deep end mentally, emotionally, and financially. These properties represent lower profits but also lower risk. They also allow you to gain valuable experience and raise a little capital in which to invest in properties requiring more extensive work in the future.

Keep your eye on the carrot at the end of the project. Far too many would be property investors give up just before they reach the point of true profitability. The goal is the profit at the end of the project.

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There are all types of investments in this day and age. One of the most often touted for creating millionaires around the world however is real estate investing. Even in the field of real estate there are several different investment styles. Each style involves varying degrees of risk on behalf of the investor. If careful consideration is taken there is a type of real estate investment that is best for most people though there are some that real estate will never be a good investment for.

Those who are simply not cut out for real estate investing are those who love to watch the ticker roll across the computer monitor or television screen indicating the worth of their portfolios on a daily basis. Those who need to see in print the wisdom of their investment practices rather than those who are content to sit on their investments as they take shape or those who are willing to actively work in order to make their investments pay off.

Buy and hold real estate involved purchasing property and holding on to it for a very long time while the value of the property appreciates in value. This requires someone that is very savvy when making purchases or extremely lucky for the most part. More importantly however, it involves someone who has the patience and tenacity to hold on to their investments for a long period of time. These investments can provide a nice retirement for the right investor as well as funds at the proper time for the weddings of children or to pay for college.

Rental properties are another excellent way to make money for those who are willing to deal with a long-term property investment. In this type of investment money is made each month to either pay or contribute to the mortgage and funds can be made once the property is paid for and sold later in life in order to receive a more complete and total profit from the endeavor. There is some degree of expense along the way that is involved in keeping properties up to date and in demand however the benefits of this particular type of investment are almost undeniable for the right investor.

Flipping is another type of real estate investment that is receiving a large amount of press these days. This process involves purchasing a property below its value, investing in repairing or rehabbing the property, and then reselling the property for a substantial profit. This is one of the few short-term sorts of investment that are widely profitable when it comes to real estate investing. There are others but those carry even greater risks than flipping.

Of course there are high-risk real estate ventures for those that need a little excitement in their lives. One of the more common high-risk investments would be pre-construction real estate investing. With this form of investment the investor is actually ‘betting’ that the future property will sell for a higher price than the investor paid once the building is complete.

Whether your investment needs are low-risk, high-risk, or somewhere in between there is quite likely a style of real estate investment that will be appropriate for your specific investment needs. If you do not find a real estate investment plan that is right for you then do not despair there is no style of investing that is right for everyone.

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