SmartCapitalist.com

Starting In Real Estate

Sunday, February 12, 2006
I have not posted in a while, but that is partially because I just purchased my first investment property at age 19. It was very important for me, because not only am I going to use it as income by renting part of it out, but also I am going to be living in part of it. The next few posts are going to be about the process of starting out in real estate investment.

Researching an Area
The first step of investing in a property is finding a general area where you want to focus. This will help you narrow down which properties you want to look at, and will help with making it easier to compare properties once you start looking at them. You want to get as good of an understanding of the neighborhood as possible.

The first thing you will want to do is look into the rents of a given area. Jog or walk in the neighborhood and get an idea of where apartments are available and jot down the numbers or websites that represent the property. You can also look online for apartments, but this will not give you any more knowledge of the geography and demographics of a neighborhood. Once you find a few prospective places to look at, call up the landlord and get more details as if you were looking for an apartment. Go look at the apartment, see how big it is, how nice of condition it is in, etc. Be sure to make notes of each apartment you go visit.

If you have time on your side, watch the properties that you went to and see if they get rented out, and how long it takes. You are trying to get an idea of vacancy rates. Some landlords will even tell you about it if you ask them. There are also firms that sell information on vacancy rates. Knowing things like this will help you later when you are trying to determine the profitability of a property.

When you jog and walk in the neighborhood you should also look into the crime rate in that neighborhood, and find where the 'desirable' properties are. The idea of all this is to determine where is hot, where properties don’t sell and just sit on the market, etc. It is also good to talk to people as they are outside. They can give you good insights to what the neighborhood was like 10 years ago, and what it may be like in 10 more years. Remember, the people you talk to may have a different view of what makes a good neighborhood than an investor, so take what they say with a grain of salt.

Once you start to learn about the neighborhood, it will be important to find a realtor, or a buying agent to help you look through properties and be your guide. Your agent will be expected to know the stuff you just learned by researching an area. However, it is important to realize that you will want to be as personally knowledgeable as possible about the area, especially with your first investment property.