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  Investing in real estate

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          Most people know that lots of money can be made by investing
in real estate, but it's not easy and there are some real risks involved. 
 It's a good idea to talk with an accountant if you plan to buy property. 

          Real estate is a "non-liquid" investment.  That means that should you need
 to sell for any reason, it sometimes takes a year or more to get your cash,
and more than likely you'll be paying from 5 to 10 percent commission to your
 broker, plus other costs of the sale, so your net profit will be affected.   Also,
 you may be subject to a capital gains tax on your profits.

On the other hand, there are some big tax advantages to investing
in real property.   Real estate is usually more stable over the long term
many other investments, and if you do buy a good property,
you can use it's equity and collateral to leverage other deals.



Most banks require a larger down payment for a land
purchase.   In fact, a lot of land deals are for cash.
There's a lot of competition to buy good build-able land,
so be prepared to act quickly.  And be creative.
Many land parcels are odd shaped, wooded, wet, or have other
eccentricities.  If you can work around those to create building sites
you can often get a good deal.
Commercial land and residential land are very different markets.
If you plan to buy land, research the zoning trends in the community.


BUY and HOLD:   Buying land on speculation can be risky.  For one thing,
you'll have to pay taxes on the land, even if there's no
 dwelling on it.   You should be very confident of the steady rise of
 land values in the area you buy in because sometimes values go
 down, not up.  
          Once you buy land you should pay close attention to the
 market and possible zoning law changes.  If you do decide to sell,
 it can take some time.   On the plus side, many people put excess
 cash into a land purchase because in a good area, land
appreciates at a better rate than many other investments.   

BUY and BUILD:  Many people dream of buying some land and building a nice home.  
That's a great idea but there are some things you should keep in mind.  
For one thing, most towns will require that your home design be at least approved
 by a qualified architect to be sure it meets local and state building codes.  Some
 towns are very strict, especially in high end neighborhoods and historic places.

           Whenever you build on raw land, you need a foundation, driveway,
 landscaping, and perhaps a well and septic system.  The land may need to be
cleared, too.   There's a very long list of things you need to spend money on
 before you finally move in. These items can be very expensive sometimes. 
  Keep enough cash  on hand to handle them.   Banks often provide construction
 loans if your credit is good.   Be aware though, that if you take their money your
 building project will be closely supervised.  The money will be given out in stages.
  Many people are better off using their own cash to do as much as possible.  
That allows them much more flexibility in timing and construction.

           If you're a builder, you'll need to make a good profit on your purchase to
 cover the large costs of developing it.   That means you'll have to very careful to
 get a good price and buy a parcel that can reduce or eliminate some of your costs. 
Items that make a land deal sweeter:  cleared land, subdivision approval,
 town road, nearby utility lines, nice views, waterfront, septic approval test, close
to a good school, etc.  

  Apartment buildings

         Many aggressive investors seek out multi-unit buildings, so you have a lot of competition.  
You'll need to be sharp and ready to act quickly when you find a good investment.  
If you buy an apartment building, you'll certainly have vacancies and some
tenant problems. 
          You'll also have some legal liability to tenants, taxes, and maintenance. 
Unless you live near your apartments, you might be better off hiring a property
 management company to deal with tenants and maintenance.  
          Also, make sure your "rent roll" covers your mortgage, taxes, and maintenance.  
 If you're lucky you may have a small cash flow, but don't count on just a build-up
of equity to compensate for a negative cash flow.   Be careful not to charge rents
that are too high for your market, too.  Many tenants start thinking of buying
if the rent is too high, so your prospective tenants will disappear.

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Single family homes

            Some people invest in single family homes because there's always a market. 
The same principles apply to home rents as to apartments.   If the rent is out of whack
with the market, qualified tenants may become buyers, or you may end up with tenants
 who are not good credit risks, because they won't be able to buy a house.
You'll want to screen your prospective tenants carefully,
because they will be living in one of your most valuable possessions.

"Fixer uppers"

            Many people have made a sweet profit by buying a run-down property and repairing it.  
 This is not for everyone.    Unless you have a good tolerance for uncertainty
and a solid financial footing, you could be asking for trouble.  
Nothing is worse than trying to sell a home that's half done,
one that the owner couldn't afford to finish.
           A run-down property can sometimes need so much work that it makes
no economic sense to fix it up.    Before you buy, get a builder or contractor
to take a hard look at it and tell you the truth.  
Even at best, it's likely to cost more money and  take more time than you think.
          If you have lots of energy, friends or family in the housing business, 
 a good builder on your side, or if you personally have home renovation skills,
you are in a good position to buy a "fixer upper".  
The up side is that it can be extremely rewarding,
and you'll end up with a home that fits your needs perfectly.


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