Wednesday, April 12, 2006

Is it time to invest in rental property?

Great question with a difficult answer. If you have ever stayed up late at night and watched those infomercial, one would be convinced that buying real estate is super easy, the best investment one could ever make, and anyone can just run out of their home buy a property and be rich. If it were really that easy.

Buying investment property can be the best thing you ever do or it could be a disaster. The fact is they don't always make money and there is risk. A common misconception is that homes always go up in value, and this is far from the truth. There are many people who lost thousands of dollars when the bubble market in the west went bust, and many were stuck with homes that were worth way less than they paid. Although right now home values in the west are strong, interest rates have risen and prices in some areas are starting to fall. All this to say be careful!

One must do lots and lots of homework to make sure that the property one is buying is truly a good value, not just a nice home. There are thousands of nice homes, but few make a very good deal. One must know the full rent history of a property before an offer to purchase is made. You must then decide what expenses will be upcoming (new roof, carpet, etc.), what taxes and insurance will cost, and of course what will be the principal and interest payment. With this information you are on your way to finding success.

Analyze everything. Poor planning equals losses. And losses are no fun.

Paul Dizmang

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