Got the real estate investment bug? You aren't alone.

By the end of 2004, the National Real Estate Investors Association's 20,000 affiliated members were double the previous year's numbers, but even at 20,000 represented only about one fourth of all U.S. real estate investors in investment clubs, the association said.

Investors accounted for what's likely a record 23 percent of all home sales last year, according to the National Association of Realtors' "2005 National Association of Realtors Profile of Second-Home Buyers."

While the investor purchase portion is 23 percent, other second home buyers who become aware of the potential for a return on their property may very well take a more speculative approach. The second home market now accounts for 38 percent of the existing housing stock and 36 percent of all homes purchased last year, NAR said.

"These aren't second homes. You know where that down payment is coming from. People are leveraging one price asset against another on a pure momentum play," said Robert M. Campbell, a San Diego-based realty broker, investor and author of "Timing The Real Estate Market."

Residential real estate investors have become a driving force in the residential real estate market -- much as the dot com stock market did to create the New Economy and the longest economic expansion on record.

But just as the dot com bust littered Wall Street with lost shirts, a real estate down turn could leave blood red ink flowing down Main Street if rookie investors let the lure of green cloud their judgment.

We talked to individual investors, real estate agents who also invest, investment clubbers and others to help get you started with the dos and don'ts of real estate investments.

Here's what they suggest.

Buy your own home first. Buying a home will not only put a roof over your head, but teach you the true cost of property ownership beyond the monthly mortgage payment, give you a primer on financing, school you on how location and changing market conditions affect property values, give you the angle on tax and other home owning benefits, help you learn about property maintenance, introduce you to a host of professionals who could prove invaluable when you really get into investments and otherwise act as a prerequisite foundation for higher studies in real estate investments.

Even before home ownership the process of buying a home provides basic information that later could prove invaluable to you as an investor. What's more -- your first home could later become your first investment property, a property in a market with which you are familiar.

"I bought my first house on May 1, 1981. The property became a rental in February 1988. Technically it was 50 percent a rental in June 1981 as I shared the house to afford it," said Richard Calhoun, broker/owner of Creekside Realty in San Jose, CA, and a real estate investor for nearly two decades.

Go back to school. A booming real estate market that pushes your home value up by double digit percentages in the first year doesn't automatically make you a savvy investor any more than the dot com boom could have made you a stock market mogul. After you buy your own home turn to the Internet, libraries of books by reputable authors, successful, credible investment groups, college and university level courses. Individual real estate investors, salespeople and others who you met on the way to home ownership may also be valuable resources, both for information and perhaps as a mentor.

Using more than one resource will help you cancel out the bad information and ferret out the good.

"The importance of knowledge and education cannot be overestimated and is almost always underestimated," said Calhoun.

Get professional help. The same way you find any competent, trustworthy and honest professional is the same way to look for a mentor, investment partner with prior knowledge or investment group. Seek referrals from friends, family, professionals with whom you already conduct business, co-workers and others you trust who've recently had a satisfactory, successful experience investing in real estate. Someone who already knows the ropes comes in handy when you need a leg up on a deal.

"There are many honest and reliable outfits and clubs that are genuinely beneficial to those looking to increase their knowledge. That's one of the good things about a club -- you get to ask other people whose information is good and whose is garbage," says Phyllis Rockower, founder of the Real Estate Investor's Club of Los Angeles.

You'll also need professional help once you are beyond the buying stage -- someone to manage your investment for example.

"For many, the question of managing rental properties is resolved by the proximity to the property and the willingness on the part of the owner to invest the time required to market and manage the property. Often, it makes sense for those far away to take advantage of a "local" property manager. The rewards of self management may be great, but one needs to consider the time investment required," said Bart Meltzer, president of RentOne Online, a Scotts Valley, CA, Web-based marketing and management tools provider for vacation rental managers.

Learn your investment market. One market's bubble could be one investor's boom and another investor's bust. A home in one market could give you vacation rental income in a half year sufficient to cover the cost of principal, interest, taxes, insurance, home owner association dues, upkeep and other costs, but not appreciate, while another home in another market won't bring you enough rent to cover your expenses but appreciate more than enough to make up for it over the long term. The variables are endless.

"The most common mistake of inexperienced investors is to make the mistake that one area is the same as another," said Romeo Danais, who has investments in Oklahoma, Texas and New Hampshire.

"Twenty-five years ago, a bunch of guys in San Jose, CA, 'discovered' Sacramento, CA, investment real estate. Duplexes could be purchased for half the price of San Jose duplexes. So these guys purchased a lot of duplexes and then made another 'discovery'. The Sacramento duplexes didn't rent for as much as duplexes in San Jose. In fact, due to the glut of empty duplexes in Sacramento they rented for even less than the differential in prices. Assuming rather than proving is a big mistake," Danais said.

Published: August 15, 2005

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.