Real Estate AssetWhat Is Real Estate?

Real estate is a long-term asset

The average value appreciation on real estate assets isn’t really all that high — typically 2 percent to 3 percent per year, which is nothing special when investing.

In addition, transaction costs on investments of any type can significantly reduce one’s wealth if not done correctly. Investing in Real estate has unforeseen costs aside of the initial purchase cost. Expenses such as transaction costs, renovations, remodeling, holding period costs, repairs, and escrow and commissions. These expenses could eat 20 percent to 40 percent of your invested equity. That’s money you won’t have when you retire.

Due to these transaction costs and low appreciation in value, it’s highly unlikely that a person will earn much wealth on real estate if they don’t own their property for at least seven years. The seven year average time frame is however a minimum. Most people who earn net profit/monies from their properties have owned them for 15 to 30 years or more.

Experts in the filed recommend that if you want to earn wealth from your real estate investments, buy something you can afford and hold on to it for the long term. Flipping homes even though may be attractive for some according to people selling you ideas on flip homes for a profit include variables and risk most new investors are not aware of.

The real estate market is a fickle business. There are countless things that can greatly impact the likelihood that your investment will sell quickly or sit on the market for months on end and most of them are beyond your control. Events such as tornadoes strike nearby, crime happens nearby, a big company goes out of business, or a new company moves into the neighborhood, local politics and government friendly or unfriendly business mentality. For better or worse all of these things have a profound impact on the real estate values nearby.

You must do your homework

Doing the proper due diligence when purchasing real estate is vital to your financial future and retirement. Unfortunately, most folks do an inadequate job of it. Here are some basic due diligence issues that many buyers fail to consider:
    •    Making sure buying property makes financial sense for you.  
    •    Getting a proper home inspection
    •    Reviewing HOA documents before you buy to avoid problem HOAs
    •    Obtaining two financing bids and properly comparing your options
    •    Reviewing the title abstract and the title insurance policy and exceptions
    •    Keeping the proper type and amount of insurance in place on your property
Make sure you take all these steps, and you’ll be an extraordinary, rather than average, buyer.

If it sounds too good to be true…

In real estate, if a property sounds too good to be true, you can bet that it is.

For more information regarding your real estate investments consult with the Etchart Business & Real Estate Consulting Group. Your first consultation is free of charge and in many cases the sellers are the ones covering the consulting firm fees. There is nothing to loose and everything to gain when it comes to good advice. Knowledge is power only when you put it to work.

 

Vicktor Etchart, Business & Real Estate Consultant
Clovis California / Reno-Tahoe Nevada / International Vacation Properties
Notary Public/ Certified Language Translators / Expert Negotiators / International Joint Ventures / Commercial & Residential Real Estate Investments.

Note: This information was gathered for the knowledge and reading benefit of our friends and clients. We recommend that you to verify it with your professional advisers before committing to purchase or sell any of your assets.