I once heard that real estate makes five times more millionaires than any other industry. According to econedge.org, it does make more self made millionaires that any other industry. Before you jump in head first, here are a few tips:
- You will have to find a way to beat the 11% spread.
- If the property doesn't cash flow from day 1, don't do the deal.
- Appreciation and depreciation are icing on the cake, don't depend on them.
When you buy a home, you typically pay about 2.5%-3.5% upfront for closing costs and Realtor commissions. When you sell a home, you typically pay about 7.5%-8.5% on the back end for Realtor costs. In order to profit, you must make more money than this spread. This is why profiting off a fix and flip is so difficult.
Many investors mistakenly believe that they know the property will appreciate in value. This is a definite gamble. If you really want the property to appreciate, you will make an investment that cash flows from day 1 so that you have the financial stability to one day watch the property appreciate.
Robert Kiyosaki is probably most famous for advocating real estate ventures and you can read about some of his outlandish adventures at econedge.org.
This post was reposted from http://finlit.biz/retirement-2/3-tips-for-the-real-estate-investor/, originally written on January 21st, 2013.
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