Buying and Selling Real Estate

What does real estate have in common with stocks, bonds and mutual funds? They all are investments wherein investors intend to buy at a low price and then sell at a high price to make a profit. However, the similarities stop there. Investments like stocks, bonds and mutual funds can be bought and sold in minutes. Real estate, on the other hand, can take months to buy and sell.

If you have dabbled in stocks, you have an idea that stocks can be easy and quick to sell. If you want to buy more stocks, you wait a day or a month before buying the same stock at a much lower price. When the stock starts to rise, you can start selling your stock and then invest on buying other stocks that are going down (but which you can predict will rise again, and thus sell). The real estate market rarely offers investors the same quick turnaround opportunity.

In the stock market, companies offering the stocks are different from each other, but what they are offering -- stocks -- are basically alike. In the real estate market, every property is different from the others; real property is unique -- always. Thus, when buying and selling real estate, you have to either buy a new property, wait for a property to be offered or buy back a property at a higher price -- all with the goal of being able to sell the property for a profit. The costs involved in the entire process of buying and selling real property is considerably much higher than the costs involved in buying and selling stocks.

In real estate, then, timing is important. You need to be able to buy a property at a low price and then sell it for a profit -- each time that the time is right. Buy and sell real property at the right time and you stand to profit handsomely. Of course, real estate investing requires that you are in it for the long term. So how do you improve your timing?

Look into properties that are being sold at bargain prices. Bargain price properties are those that are in dire need of repair or are going to be foreclosed. There are foreclosures that sell between 25% and 35%  off the current market price. Check local newspapers because Notice of Default listings and upcoming auctions can be usually found there.

Identify locations where there is a high trend of properties being sold, where the population is declining, but it is likely that a turnaround will be experienced. For instance, the Lower East Side used to be one of the depressed neighborhoods in Manhattan. Today, properties located there are selling at a premium. There are also areas in other major urban locations that have experienced similar turnarounds. Thus, you need to do a lot of research and consider this a long term investment.

Are you handy with tools or do you know a contractor you can hire inexpensively to make repairs? If you do, look into acquiring property that is needing substantial repair. Simple repairs such as replacing a leaking roof and installing new drywall and painting walls that have been damaged by water can help increase the value of a property by more than 10%.

Since real estate investing involves high purchases, it is vital that you have as much working capital at your disposal. This means you need to be liquid enough -- that you have access to money, which doesn't necessary have to be your own money. This is where a sterling credit history and high credit rating become advantageous -- lenders are more likely to finance you when they see that you are not a credit risk.

Real estate investing is not for the faint of heart. It is not for those who are after making quick bucks overnight. Real estate investing is for people who have the patience to do volumes of research as well as the keen ability to recognize trends and deals.