Did you Read Where to Invest In Real Estate? Good... (If not, then go back and read it!) I wanted to get rid of the wannabe real estate investors just scanning headlines and not wanting to learn anything! I'm honestly not telling you where to chase the next great real estate investment because the truth of the matter is, you can find the great real estate investments in your own backyard with these simple tips we've used since 1997. (Before real estate investing was even considered cool and images of landlords were drunks as portrayed in movies such as "Kingpin" (1996) with Woody Harrelson and Randy Quaid.)
Rule #1: Avoid making your choices in investing in real estate markets headlined by the national media. The truth of the matter is that many of these articles are written by journalists who have little clue about real estate investing and are simply quoting last years appreciation rates. BIG WARNING!I recently came across a highly respected online real estate publication that came out with a similar type of article of where to buy that quoted and linked to a site with these predictions. Evaluating the site being referred, this site had a link on their home page that was attempting to attract real estate "investors" that negotiated with new home builders in these so called top markets for discounts for the buyers they brought to the table.
Obviously, they make money for this. One of the top cities they listed was Albuquerque and since we have a friend that owns Salestraq in Albuquerque, we knew appreciation for 2007 was far different then 2006. Long ago, I used to think that this online real estate publication was respectable, but I've read right into their motives for what they do including the above example and leads us into Rule #2.
Rule #2: Don't automatically assume a popular real estate blog or online real estate magazine is giving you advice because they really like you and want to give you the best advice. The truth of the matter is that there are real estate bloggers out there getting paid to blog to promote a service. There are media companies that are highlighting a community because a developer pays a "minimum" amount of advertising dollars in their newspaper or new homes magazine to be "Showcased" by one of their real estate journalists. I was actually shocked when we sat down with an advertising company that enlightened us on this practice. Spend so much money in guaranteed advertising... so and so will highlight the project in an article.
Rule #3: Don't buy just because somebody tells you it is a great real estate investment. Let them show you it is a great investment with solid numbers that meet your criteria. I sincerely do not know how building a new airport justifies a 72% increase in real estate prices when incomes are only projected to increase 29%. Sounds like speculation to me. Real estate agents and brokerages have to disclose their interest in a project if they want to highlight it, but what would stop a big developer from paying a national magazine big bucks in advertising to highlight a particular project or area?
Rule #4: Don't invest into a market you really don't know about except for what you have read in the newspapers. Know your local economic conditions: incomes, job growth and most importantly.... demographics which leads us into Rule #5.
Rule #5: Know your demographics and understand the concepts of the different classified groups. For example, Baby Boomers, born between 1946 and 1964 --- currently the youngest baby boomers are in the 43 year old range with the oldest being in the 61 year old range. This is the largest and most important factor in economics due to the huge numbers of the population and their disposable incomes right now. Think about the years that this group had children and you'll understand why "empty nesters" have moved to regions such as Arizona, Florida and Las Vegas -- and drove up real estate prices.
In our post Rehabbing homes in Barrington we touch on the subject of just using canned articles paid for with no examples with an attempt to advise you concerning real estate. We'll elaborate a little more on this subject in our next post.
Date: 2007-07-18 05:31:57