Understanding Real Estate Investing & For Sale By Owners

Understanding Real Estate Investing & For Sale By Owner
Real estate investing involves the purchase of real estate for profit. The most popular over time has been to accumulated houses slowly by renting out properties with a positive cashflow then reselling later for capital gains. This is a tried and true method for wealth accumulation. In addition, real estate investors may wholesale properties as a means to make instant profits, rehab, short sale, and a host of other methods.

I’ve made a lot of money using all methods. In recent years the cashflow method has been downplayed because of the quick profits made in wholesaling with little or no money but this is the purest form of investing. I love wholesale deals because of the ability to generate quick cash unfortunately it is a glorified job because you are only as good as your next deal.

There are many gurus out there that contend that real estate is a panacea where you cannot lose money Although this is false, there are a number of advantages to investing in real estate. The biggest factor in marketability of an investment is supply and demand.

The first big advantage is that it is an extremely expensive product. Each sale you make generates more profit potential for this reason. A small percentage rise in value can be a huge dollar amount of profit.

Leverage, or the ability to borrow based on the value of the property, is probably the second greatest advantage. It is much easier to finance real estate than any other investment. While investing in most assets requires the purchaser to have the full purchase price available for the asset, in real estate investing, one only needs to have a fraction of the purchase price available (like 5%, 10% or 20%) as a down payment. Therefore, real estate, although incredibly expensive, is still easier to buy than say, a piece of industrial equipment of the same value.

Local advantage is rarely discussed but it stands to reason that you know your neighborhood better than a real estate investing expert would if they were in another part of the world. This creates an advantage the beginner can exploit in his market.

The bulk of the world's assets are in real estate.

One way a beginner can get started in real estate investing without taking on any personal risk is to 'bird dog', or hunt for good deals, for another more experienced investor. This allows the beginner to learn to find and recognize value.

Where To Find Deals

Most of the best deals can be created dealing directly with the owner when properties are sold For Sale By Owner. This eliminates a needless middleman who may hold a real estate license but is likely to know little about the sales process, creative financing, or the many ways to sell a house that benefits all parties.

For Sale By Owner (abbreviated as FSBO; ['fɪz,bou]) is a real estate term which describes the situation in which a property is offered for sale directly by its owner and without that owner having solicited the help of a real estate broker, implying that no real estate commission is associated with the sale. In recent years, the term has been used more broadly to describe the process of marketing, buying, and selling of real property without the representation of a real estate broker.

Many sellers who choose to sell via FSBO do so to avoid paying a commission to a broker, typically 6% of the selling price of the property in many parts of the US. Commissions can range between 5% and 7% in different markets across the U.S. as well as in Canada.

For more information on real estate investing be sure to check out “Real Estate Magic 101 - How To Get Rich In Real Estate Even If You Are Dead Broke!”

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