The Do's & Don'ts of Real Estate Investment

26/09/2007

In the early spring/late winter of this year, I wrote in this column a few thoughts I had about investment in real estate vs. investment in the stock market. I was inundated with e-mails and other communications from readers. Some that had real estate investments and some that were just thinking about it. One lady suggested that if I liked the idea of real estate investment so much, that I could take a couple of nightmares off her hands.

Since then, in light of the unfortunate problems the stock market has been having, I've been approached by many folks looking to invest. I believe that this trend will continue and caution potential real estate investors to get themselves educated before they leap. To that end I have composed a list of do's and don'ts for you to follow.

1. Under no circumstances should you purchase an investment property using the services of a Realtor who does not own investment property themselves. This is an obvious and yet highly overlooked aspect of investment. In the stock market, people do it all the time. If a broker doesn't own personally, the stock that he is trying to sell to you, it is your obligation to yourself to ask the Broker - WHY? The same applies to real estate investment.

2. Get the advice of a professional. I have come across so many would be investors that purchased a property on their own and began to rent it out, only to be left with a bad taste in their mouth and a loss in capital.

3. Don't jump in without looking first. It is important to examine all factors before making your decision. A professional real estate investor will have made most of the mistakes before and can help you avoid the pitfalls.

4. Know what you want to accomplish through real estate investment. Is it to create monthly income or is your goal to put your kids through college in 15 years or so? Maybe you're a contractor or in a seasonal business, and want to create a make-work project for yourself during your slow season. Or perhaps you have a bag of cash and just want to park it somewhere for 10 or 15 years but want nothing to do with tenants or property management. In each of these situations a different type of property is required.

5. Develop a five or ten year plan for investment. Some people plan to buy one property a year for the next ten. This is not a bad idea, because it employs the stock market concept of, "Dollar Cost Averaging". However, it is important to remember that you are dealing with a market that rises and falls with the speed of a tortoise. If you are not patient you may find yourself buying at the height of the market with little or no chance to recoup your investment for several years

At the end of the day it is important to remember that Real Estate investment can be your best hope for long-term financial independence, but without proper guidance and a healthy amount of common sense it can also cause you a whole lot of financial pain. Thanks for listening, I hope this helps.

Till next month this is Rob Thompson saying, "Good Luck and Good Investing!"

Rob Thompson has been helping families make the right real estate decision since 1985 and continues to do so with his team of professionals in the communities that border the Hwy 416 and 31 corridors.

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