Investing in Real Estate – 5 Questions and Answers of Demystification

Those interested in, or considering, investing their money in real estate often have many questions. Let’s look at five questions and their answers to help demystify the real estate investing scenario.

Question 1:

Is it hard to find investment properties for sale that have a positive cash flow? Answer: Nothing is hard to find if you know where to look. There are many misconceptions in the world of real estate investing and this is probably one of the biggest ones. It is possible to find investment properties that are in a positive cash flow scenario and are up for sale. Just like any major purchase, it is important to research the area that you are looking to buy, find the properties that you are interested in and then evaluate the property’s financials, etc.

Question 2:

When is a good time to buy an investment property? Answer: You should consider several factors before you buy a property. First, it is important to evaluate the overall picture of the real estate market. Are prices dropping or going up? Is it a buyer’s market or a seller’s market? If it is a buyer’s market, then you are in a better position to negotiate sales prices, terms, etc. Next, you need to consider the interest rate environment. Are interest rates low or high? What are interest rates expected to do – go up or drop? Obviously, the lower the interest rates, the better financing options you will have.

Question 3:

Where can I get the money for a down payment and other costs associated with investing in real estate? Answer: There are many different sources available to you to come up with money for down payments, closing costs and the other costs associated with buying an investment property. Some investors use savings, while others turn to mortgage financing or private investors. More importantly, it is critical that you educate yourself on fund sources and financing options before making any decisions on purchasing a property.

Question 4:

When I buy properties should I title them in my own name, or an entity name such as a business or corporation? Answer: The answer to this question really depends on your personal, business financial and tax situations. The best professional to answer a question like this is your tax advisor and/or a real estate attorney.

Question 5:

Is a real estate license required to invest in property? Answer: There are some exceptions to the rule, but generally a real estate license is not required for an individual to invest in real estate.