Timid Steps into Real Estate Investments.

By Rick LeForce Published 11/30/2007 | Real Estate

Many ordinary people have already made a killing by  investing in realty. They were probably very apprehensive about  buying the first investment home, but as long as that goes well,   it is easy to get hooked! In case you keep mulling it over and wonder about the risks, here is a starter kit of very basic pondering points.

There are certain pointers that should be adhered to if you want  your investment to be trouble free. These apply to  selecting the property to buy, financing it and renting it out.

You may think that the profit has all been made in the property market. While property has risen considerably in price in the last few years, it is not too late to make money in the realty market. One theory  is that the baby boomers will keep pushing the price up in certain areas. Why is that, you may ask?

Well, baby boomers (so called because their births coincide with the end of the war when all the service personnel were de-mobbed; following their homecoming,  a slew of babies were born) are all coming up to retirement.  At the moment the oldest baby boomer is only 61, so there still a few years to go before the main 'rush' to retirement.

While it is  true that some retirees opt to stay  in the same town that they have worked in, many do not. A large majority of retirees have similar dreams about retirement and large numbers  move to a new location.  They move to  be with family, or to be near the sea, a lake, away from the snow (or toward the snow!), away from the damp, to have a view etc. Retirees also often 'downsize' and move into a smaller home.

Now we have two clues about investing: a choice location, or one with a view and a smaller property, so an investor may want to think  about buying only a modest sized property. Leave your emotions at home and do not buy because of a 'cutesy' kitchen; think only of the numbers. If you buy near a hospital, college or University, you will find it easier to rent.

With regard to financing, quite often your prime home can provide the equity for a new mortgage. The rent should cover the mortgage payment, so you may need a good size down payment. Go to your bank or mortgage broker with your own personal financial facts before you start looking. Find out if the idea is financially feasible, check repayment costs and get pre-approved. All this is a free service and you can simply discard the whole idea if you are getting cold feet. 

One of the golden rules when investing in real estate is to think  about the rental situation before you start looking at property. This side of it is important, after all, it is the way in which the house pays for itself. The first question is: are you going to use a manager or attend to it yourself? If you plan to look after it yourself, you will be wise to buy in your own town - but not in your own neighborhood.

The reason for this is that monthly inspections, or even the possibility of them, can go along way toward keeping your house in good order. Not only does the tenant have to   clean it and cut the grass once a month, but you will also have the opportunity to inspect for leaks in roof, appliances, drainage in the basement/foundation etc.  Your tenant is less likely to accumulate old cars in the yard if you visit every month.

This brings me to the final pointer: a contract must contain definite guidelines indicating the code of behavior you require from your tenants. It must say 'cut the grass once a month' or 'empty all garbage once a week' or 'no subletting' . It must also say 'inspections may be carried out once a month upon 24 hours notice' . These clauses will mean it will be easy for you to evict the 'tenants from hell'. Taking  references, including those from the previous landlord,  will probably help you to avoid these people anyway.

Now, you can sit back and  wait for the retirement rush to force  up the prices  in the property market. While you are waiting you can   analyze what it feels like to be an investment property owner.