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Investing/ Buying in Real Estate

Updated on October 18, 2008

Investing in Real Estate

Selecting rental property

• Compare prices of similar homes to make certain the property isn't overpriced. Be skep­tical of a seller's assurance that you can raise the rent once you take over. If it's so easy, why didn't he do it? Compare rents for similar units nearby.

• Put everything you and the seller agree upon in writing.

• Make sure the agreement re­quires the seller to turn over tenants' damage deposits on closing title.

• Examine existing leases before closing.

• Keep loan payments affordable so you won't get hurt by oc­casional vacancies.

• Be wary of investing in proper­ty on which maintenance has been put off. The seller's income and expense statements could show a handsome return because he hasn't spent enough for repairs.

Buying undeveloped property

• Ask one or more independent brokers in the area whether they would be willing to list the pro­perty and what its selling price would be.

• Visit the property; don't buy anything sight unseen.

• Make sure that any representa­tions about property im­provements and the services that will be provided are added to the sales contract and signed by the sales manager. If he won't sign it, you shouldn't either.

• Find out whether the land can actually be used as a home site. Write, phone, or visit the ap­propriate offices of the local government. Ask what kinds of permits must be obtained before you can build on the property, and whether sewer and water hookups are available.

• Determine whether the devel­oper's bonds for improvements are the surety kind so that if he goes bankrupt the money will still be available. Escrow accounts can also be used for this purpose. A corporate bond for further improvements is only as good as the corporation itself.

• Understand clearly what will happen if you default on your payments. You could lose everything."

• Read the property report, the sales contract and all other papers thoroughly. Then take them to an attorney who deals in land transactions for his evaluation before you sign anything.

Investing in farmland.

A land's ability to produce high crop yields is important. But even less-abundant farmland should increase in value if it is located near growing cities and thus has potential for develop­ment.

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