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Things to Look Out For When Investing in Real Estate

You should have seen my stock portfolio within the last few years! Whew! The stock market is up, the stock market is down, the stock market is sideways and anything else you can think of… it’s a roller coaster and yes I realize that we’re in the middle of a recession that has been going on from 2008 through to 2010, but that doesn’t make it feel any easier to watch your life savings fluctuate so wildly from day-to-day.

Those wild fluctuations have convinced many people to get out of the stock market completely and to instead focus on other means of investing, particularly real estate as it has been a solid income producing asset for many many years, the current recession notwithstanding.

But I find that many new investors don’t know exactly what to look out for when it comes to investing in real estate so I thought I would write a quick little article today to give you a heads up and show you certain things that you can look for when evaluating a new real estate investment.

First you must always review the underlying properties of the investment very carefully. If the investment is fairly substantial, hundreds of thousands of dollars or more, it’s always a good idea to find an expert to personally inspect the property as well as the community for you. There are a million things that you won’t know to look for that they will so it’s essential that you find someone that you’re comfortable with that you can develop a good working relationship with.

Besides hiring somebody to inspect property for you, here are some things that you can look for yourself.

First look at the acquisition cost of the property. This will include both the land as well as the buildings and try and break it down on a square foot basis. After you find a square foot number, compare it to other properties that have sold recently in the same neighborhood. How do they compare?

Next look at the type of construction. Is it a wood frame property or a brick property? Does it have any amenities like a pool or fire places or landscaping. Next look at the underlying mechanics of the building itself such as heating and air-conditioning as well as plumbing and electrical and insulation and the quality of its roofing. Knowing whether or not these things will need upgraded or updated is essential before making any type of investment.

Finally look at the occupancy. Is the building full of tenants? Are the tenets fully paid up with their rent? Is anybody behind on rent and if so how much and for how long. Next take a look at the applicable city laws because some towns have laws against evicting tenets that may make it difficult for you to turn a profit on your investment if you’ve got spend extra money on massive legal fees just to get a paying tenant into the building.

There are many different things look for when getting into real estate investing but hopefully these few things that I have explained to you today will set you off on the right foot down the path towards real estate investing profitability.

Written By Jason Markum

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