Real Estate Investing: Insider Tips On How It Really Works

by : Hunter Craig

Real estate investing is about more than buying a property for below market value, throwing some paint on the walls, and making tens of thousands of dollars in profit. It's about more than sinking a few thousand dollars into a bogus "investment club" or grabbing a house at a foreclosure auction and selling it. To learn the reality of real estate investing, keep reading.

You Have to Spend Money

Buying real estate costs money, whether it's borrowing costs, closing fees, attorney payments, agent commissions or down payments - you're going to need to spend money to make money.

Any scam or program that claims you can make money on real estate investing without spending any of your own money is lying. So if you hear promises along those lines, walk away.

You Will Pay Taxes

While so many real estate and foreclosure investing scams claim you can make hundreds of thousands of dollars on real estate investing, none of them ever talk about what happens in April when you have to pay capital gains tax on those profits. Those can add up to a significant chunk of change.

Yes, you can make money, but the reality is you will need to pay tax on that money, particularly if the property was not your primary residence where federal tax laws differ.

Location is Key

Buying a foreclosure investment property is about more than snatching the cheapest house at an auction. Rather, it's about knowing your market and finding a location that's actually a prime candidate to sell for a good profit in a timely manner. Picking up a bargain won't seem like such a good deal in two years if you're still saddled with a property in a location that simply draws little interest.

You Need Professional Advice

Instead of spending your hard-earned cash on instructional DVDs and ebooks that are little more than a selling tool for more products like expensive seminars or one-on-one conference sessions, invest your money in certified, professional service.

Search for a quality real estate agent that knows your local foreclosure and short sale market well. Then, spend the money on a good real estate attorney who understands your state's foreclosure and redemption laws. Finally, get a great house inspector who can offer experienced assurance that you're buying a sound investment which will not cost you more in the long run and eat up your profit.

Making Money Takes Time

The longer a home appreciates, the more money you're going to make on your investment. You'll do even better if you're able to fill the property with quality, reliable rent-paying tenants. Unfortunately, the majority of real estate investment programs lure buyers in with the concept of a making quick buck, when the reality is that the full process of purchasing and resale of a home can take at least a year, if not longer.

If you enter the world of real estate investments with your eyes open and realistic expectations, you will find yourself in a much better position to plan for longer term success and have the patience to seek the truly good deals rather than jumping in impetuously to something you'll later regret.