HOW TO INVEST IN REAL ESTATE

RENTAL REAL ESTATE 

People often want to know whether investing in rental homes is a good investment. It all depends.

STEPS:

1. 1
   Never buy real estate as an investment unless you have a 10-15 year horizon.Do not buy during a bubble.
   

   • In the years 1990 - 1994 Southern California Real Estate experienced a housing correction down and prices fell for four years. This was during the "Aerospace recession" when the Government cut back on military spending. From 1995 to 1998 Foreclosures were sold off and prices remained depressed. In 1998 foreclosures ran dry and properties moved up for 8 years until 2006.
   • In the years 2006 - 2007 Southern California Real Estate experienced another bubble. People were buying homes with the hope of renting them out for a year or two and then selling them when the homes increased in value by 50% - 100%. Unfortunately, most people who buy in a bubble environment with a short term horizon lose. People were paying inflated prices for homes and then renting them out and running huge monthly negatives. People didn't care what they paid or what the monthly loss would be. They focused on what the potential appreciation would be.
   • These bubbles seem to come every 10-15 years and everyone wants a piece of the action. The great majority of people never get the chance to get out in time and get financially hurt. The wise investor is not swayed by greed and quick returns. They buy homes that make financial sense as a rental not as a quick opportunity to make money.
   • Once every 40 years a major bubble occurs and it takes a couple of extra years to clean-up and sell-off the foreclosures. These major Housing tops occurred in the 1890s, 1930s, 1970s and 2010s.
2. 
   2
   Look for properties that are at, or near the bottom, with homes selling below what it would cost to build them. If prices are low and interest rates are too, that combination makes buying ideal and probably a once in a lifetime opportunity. Arizona, Nevada, Florida and some parts of California are the most depressed in price due to the over-building that occurred.
3. 
   3
   Look for a local rental market that is excellent with high demand for rental homes. The tenant pool should be made up of people who have made financial mistakes in the past and cannot qualify to buy. There may also be many people who have lost their homes in foreclosure. You should be able to rent everything in 30 days or less.
4. 
   4
   If you have the time, energy and disposition you can think about managing your rental yourself if you live close by. If not find a good property management company. It will be worth the cost. If you do it yourself make sure you screen your potential tenant thoroughly. Screen for credit, criminal and sexual predator. It will cost you some money but will save you from potentially devastating losses. There are rental owners who don't do their due diligence and end up with scam artists who stop paying as soon as they have possession and do tremendous damage to the home.
5. 
   5
   Make sure you have reserves. Owning a rental property can have unexpected problems. Your tenant can lose their job and not be able to pay the rent. You have to have enough money in the bank to get you through months without any money coming in. There are owners who are dependent on the rent to pay their mortgage. If you are in that situation then do not buy until you have a six month reserve built up.

6. TIPS:

7. • Do not try to manage the home from long distance, carefully screen your tenants, and be sure to maintain reserves for unexpected issues.

SOURCE: wikihow