Consumer lending is based on your personal income and the size of your other debts. A real estate investment stands on its own feet. If the anticipated income from the specific property will meet the mortgage payments and operating expenses, plus a little extra for surprises, you will qualify for the loan.
If you wish to buy properties and flip them, you must have a realistic budget for necessary expenses until the resale and identify a source for the money to pay those expenses. If the money will come from borrowed funds - because you borrow enough to buy the property and meet the expenses - then your personal lending credit limit does not matter. This concept is at the heart of private individuals' ability to invest in real estate.
Almost everyone will make a bad decision at some point. And, while you can never eliminate risk, you can manage it wisely. Generally speaking, the larger the profit you expect to make on something, the greater the risk will be because there is always a lot of competition for low-risk deals. Everyone wants to find one. If you are buying low-risk property, the competition will drive up the price until your profit is relatively small, which is not necessarily a bad thing.
A friend of mine started investing in rental houses twenty-five years ago, in a relatively small town. Today, he owns hundreds of rental houses, three hundred apartment units, a few office buildings, and a retirement community. He now spends all his time fishing and traveling while his son runs the multimillion-dollar business. His success was accomplished with low-risk, low-profit properties and the passage of time.
You can minimize risk in two ways. One is by investing in low-risk properties. Typically this would be something like a brick, singlestory rental house with three bedrooms and two bathrooms in a good school district. There is almost no way to get hurt, as long as you pay a price that is consistent with other home sales in the area.
Talk to people you trust, or read general books and articles, to obtain a solid background knowledge. Soon, you will have an idea regarding the type of property you want to purchase for your first investment. Next, read several books about that particular type of property. You will also need to learn some tax law because many investing decisions are affected by the potential tax consequences. Mastery of some very simple bookkeeping skills is also important. If you plan to be a landlord, you will need to familiarize yourself with the landlordtenant laws in your state, which are usually available online or from a county law library.
You also should know your local market very well - keep track of local news stories regarding business and real estate. Periodically check out what your competitors are doing. And, the more you engage in continuing education, the more successful you will become.
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Note: This article was sent to us by: Gary N. Orson at 06272010
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