Real Estate Basics

Real estate basics are the nuts and bolts of buying and selling real estate. If you are an agent or a broker, your knowledge will go deeper. If you're an investor who specializes in real estate, you'll likely know much more. But for most of us, real estate is somewhat mysterious. We hear all the time how real estate is a great investment because it always goes up, and then drive by homes that can't sell because the market is so depressed. As non experts, it is hard to make sense of it all. If you're interested in buying a home, it is good to get with a certified financial advisor and discuss the idea. It is important to make sure the advisor you work with is well versed in real estate investment. Personal finance is such a vast field that not all advisors are generalists anymore. In this case, that's good news. Get with someone who's a specialist in real estate transactions and you will have a powerful ally on your side throughout the process.

When to Buy Real Estate

There's a common adage that many people think always holds true, and that is, you should snap up real estate when it's priced low, because it will always come back up and then you'll make your money on it. Well, there's at least a few things wrong with that logic. First of all, this statement suggests that any one of us can accurately predict when the bottom will drop out of a given market. In this case, it suggests that we can somehow tell when home prices have reached their bottom and a given property is just about to start being worth more. It's not like we can artificially induce a market change. Financial advisors do advocate real estate investment, but not exactly for that reason.

Another problem with the adage that we should buy up all the available real estate while it's cheap and then hold it until it's worth something is the problem of the opportunity cost. Tying up your money in cheap real estate can pose some problems. First of all, the initial down payment you dropped on the house is now sunk. You can't invest it anywhere else as long as you own the home. Second, the house continues demanding to get paid every month, and property taxes come due twice a year. Meanwhile you're still waiting to see the market magically heal itself so you can sell the house for a ridiculous profit.

Before buying real estate, you have to ask what you are hoping to accomplish with the purchase. These days, we are learning that it is not easy to project the future usefulness or value of real estate. We cannot know for sure whether a home will appreciate over time. We certainly can't say whether it will increase in value enough to offset all the losses we took in the intermediary period between purchase and sale and still give us our initial investment back in average annual returns with some extra on top. Other investments might not be as fun to brag about, but they are simpler to make money at than real estate.

Learn How Real Estate Works

No one should blindly invest into real estate and hope to profit. There are plenty of people who exclusively deal in property acquisition and sales and make a fine living. But these people have spent the time and effort necessary to learn what they need to know to thrive. Investors should not be too hasty and should first learn more about real estate basics.

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