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Real Estate News and Advice |
July 8, 2008 |
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Selling And Moving For Investment Sake?
by M. Anthony Carr
Question: We are considering refinancing our home and have decided to use that money to begin buying and selling real estate. I would like to purchase a lower-priced home to fix up and sell. I hear about all of these real estate success stories and I am just wondering if this is a good course of action. An alternative to refinancing would be to sell our current house and purchase another house that would be a step up for us. My wife and I are not sure if we would be making the wrong move by staying in a house we really want to sell on a chance that buying real estate (to fix up) would be a better alternative and a good money making opportunity. Is this something that takes several years to accomplish? Are we taking a huge risk? Answer: The first step for you and your wife is to determine if you are ready to launch a new business. What many potential real estate investors don't realize, it seems, is that real estate investing is not like investing in stocks and bonds where you simply place your money with a broker and hope for the best. Real estate investing is an active investment (unless, of course, you're looking at real estate investment trusts [REITS], but that's a different story). Look at your letter a little closer and you'll see what I mean. You want to "begin buying and selling real estate." Sounds pretty simple, doesn't it? Before you launch into the real estate investment world, first consider how the transaction went with your primary residence. The agent probably took care of many of the minute details, such as lining up contractors for inspection items and even getting the inspector. If you're going to start investing on a regular basis, then you'll want to develop relationships with these professionals yourself. These are the steps you're going to have to take to get started in buying and selling real estate:
If you're holding onto the property short term, you'll need a short-term insurance policy to cover the property until you sell it again. And then here's the kicker -- you have to do this every time you want to buy another house, fix it up and sell it. As you can see, this is another job, when you're considering the refurbishing of property and selling. You CAN make a lot of money, and you're going to work hard to do it. The good part about it is that the returns are usually higher than what you'll find in any other business. Whether to move up into a better home now or to invest in real estate is a personal decision, it seems to me. Either you want to invest in real estate or you want to keep rolling your equity into a bigger, better home base. For most people, they can't do both. Write down your financial goals together. Find a real estate agent who can walk you through real estate investing as it pertains to your area and then talk with your accountant about tax liabilities and benefits -- then, make your decision. Published: December 26, 2003 Use of this article without permission is a violation of federal copyright laws. 
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Mr. Carr has covered real estate since 1989. He is the author of