Real Estate Investment – Mega Mistakes Made by Newbies

The real estate investment fever is more contagious than Swine Flu. Every single day, a myriad of newbies enter the market, hoping to make it BIG. The rush to real estate investment has gained an increased momentum after the stock market began going in one direction: Down! Many of these real estate newbies are actually experienced connoisseurs of the stock market. After losing their franklins in the stock market, they are now trying to earn their money back in this area just because they have ‘heard’ that real estate is very promising. I have met many of these newbies and here are five common mistakes they commonly make;

1.) A Mega Mistake That Deserves the Electric Chair Treatment: Stock Market Mentality

The stock market crash flushed a 13 figure amount ($7,000,000,000,000!) down the drain. After such an expensive lesson, you would naturally be inclined to think that these investors have learned something. But no! They continue to reiterate the same mistake- hypothesizing what happened the last week will happen this week. 90% of the newbies that I have talked to, want to give real estate investment a shot because a certain friend’s father or an uncle’s brother-in-law earned a big buck from it a few years ago. Now seriously doesn’t this sort of reasoning deserve a couple of trips to the electric chair?

Just like any other business, real estate investment also has some degree of risk attached to it. What substantially increases this risk is when one enters the market with the mentality of making an immediate gain. With such a mind-set, you aren’t making an investment, you are gambling! Real estate appreciation occurs over a longer period of time. If you invest in property, considering sticking with it for 5 to 10 years, the chances of you coming out on top are very close to a 100%! Of course, you can also aim for a shorter term investments such as 6 months and 1 year. But with such an investment your timing needs to be absolutely right.

2.) A Mega Mistake that Deserves 5 Canes Every 10 Minutes: A Blind-Fold Real Estate Investment

Being naïve, newbies scramble for properties based on pseudo advice! Such a mistake will turn your hundreds of thousands of dollars to just thousands. Newbies should never put their money into a property because someone told them to. Get educated. Know how to differentiate a good deal from a bad one. Before you invest money into actually practicing real estate, invest your money in learning the theoretical aspects of it. Success in this field is directly proportional to the amount of knowledge you have. Picking an investment opportunity isn’t like putting up a map on the wall and shooting darts at it. You aren’t choosing a holiday destination. Your decision could substantially Increase or decrease your capital. Be wise!

3.)A Mega Mistake that Deserves Water Boarding: Zero Cash Reserves

Survival in the real estate market is heavily dependant on cash flow. For you to be able to stay within the market for a good length of time, you must have cash reserves in place. Even a fifteen year old school drop-out can buy a property. The difficult part is when you have to manage a negative cash flow. If you can successfully do this, there is no doubt that you will be the next Donald Trump! Having effective cash flow management prevents you from making decisions that aren’t logical or those that don’t give you max returns on your real estate investment. Here is what you can do when you have healthy cash reserves;

· Instead of selling ‘now’, you are able to wait for the market to pick up further demand
· You don’t give your properties to less than qualified tenants.
· Instead of temporary repairs, you are able to give your property an over haul treatment consequently raising its value even further.

It is quite obvious that this wouldn’t be possible without some back up money in your wallet. This is a very critical point for newbies to take note of. Real estate investment is perhaps the next decision you could ever make provided you are equipped with the know-how. Don’t let the market rule you. You should rule the market!


Hip Hip Hooray! Real Estate Investing Strategy Secrets Revealed

Real estate is arguably the most profitable and safest investment strategy to use and there are plenty of people around the world who have become independently wealthy because of real estate investing and this is because everybody needs a roof over their head. In Australia particularly there are more people coming into the country than the amount of residential construction approvals. Do your math, it stands to reason that property prices are going up regardless of what the economists say, sure there will always be downturns in the market but you can ride these if your property investment advice was sound in the first place.

Obviously you will need good property investment advice such as the best place to invest and the amount of money you can afford to borrow and how to utilise property investment tax.

There are many forms of residential property investment strategies out there such as flipping and wholesale real estate investing that you could adopt but just remember your level of outlay and risk. You need to get your sums exactly right when outlaying costs for renovations etc. Know also how much it will cost you to hold the property, in other words how good your cash flow will be needs to be considered but there are ways to be a successful real estate investor and profit from those investments regardless of a down-turn in the economy.

The recommendation is to use someone else’s money such as:

  1. The most obvious, borrowing from a bank
  2. Use equity in your own home as leverage.
  3. Get permission to use other people’s equity to obtain a deposit bond.
  4. Swap tax for property.
  5. Set up a trust and use your superannuation fund.

Use your own money to automatically pay extra onto your home mortgage as this is not being tax leveraged and ALSO pay by fortnightly installments this will shave years and thousands of dollars off your loan.

My advice is to keep your job, insure and plan against any adversity, get to know how to budget, keep your head and do not panic.

Should you have any concerns do what all good real estate investors do, go back to the experts and get reassurance and reassess your situation and find out if the market is really as bad as the newspapers are telling you. In fact throw the newspapers out the window. Do not read them, their figures are outdated and fuelled by sensationalism. Keep focused on your real estate investing strategy and as soon as possible add to your portfolio. Investing in rental properties is building on to your long term wealth.

I realize there is a lot of advice out there about buying houses, doing them up to sell quickly or rent and other such strategies but keep in mind the following:

  • Doing up houses means outlaying money that you are putting at-risk.
  • Houses attract families and children meaning lots of maintenance costs.
  • Old and new units near universities, means young heavy handed adults meaning lots of maintenance costs.
  • Old units and old houses do not attract good government tax incentives, remember swap tax for property?

New units in trendy areas on the other hand, near entertainment, good restaurants, shopping malls and railway stations and in big cities are always a goer. This is where people are knocking on the doors to rent, don’t leave yourself open to vacant houses, you want new modern units with all the modern conveniences, expensive? Remember don’t focus on the cost of the unit; focus on your cash flow that is what really matters.

Go ahead and use this free property investment advice and set yourself up for the future, retire early. But remember to always seek financial advice before stepping out in any investing venture.

Happy investing!

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