Investing in real estate and making a profit

Buying real estate is something that is portrayed in popular television series all over the world. Wherever people live, that opportunity presents itself, especially when urban areas are being updated and brought in to vogue. On the other hand, suburban commuting has its pitfalls, and doesn’t turn out to be the ideal peaceful, detached American dream away from work for everyone. Too many people joined that bandwagon and what happened when gas prices went up was that this also increased the cost of living; getting from A to B costs money.

Urban redevelopment

With city centers becoming run down, more and more investors saw the potential for investing in real estate. Even the government jumped on the bandwagon by seeing the potential of updating urban areas that would otherwise fall in to decay. In Pittsburgh, for example, the Urban Redevelopment Association works toward acquiring and improving property, thus improving run down areas that may not otherwise have been developed. So how does this affect the individual who has a little extra cash to invest in real estate?

It’s simple: Associations such as the above mentioned don’t buy all property. Nor do they have local knowledge in every town. Look around your town, read up on current developments and be aware of areas that are becoming upmarket. People who refurbish property to gain from a company investment don’t do it lightheartedly. They invest a lot of money in that development. They see the potential of an urban area and put money into developing houses or apartments knowing there is long-term profit to be had.

As a small time investor or a first time investor, you need to look at those areas that are starting to be improved, and look for properties within those areas that are relatively affordable, but also have the potential to turn a profit. Houses sold by auction may be of interest, though be aware. You need to ensure no existing mortgages or liens remain on the property. Also, before auction day, visit the house to establish the potential cost of refurbishment. When you put in a bid for a property by auction, you will be expected to have the financing already in place and available. This isn’t a method of purchase for those who have little confidence. However, with knowledge, estimates from professionals and a firm idea of your highest bid, you really can make money.

The auction house isn’t always the best place for the unaware. Look at property available on the market within your target area. The aspects to bear in mind when investing is what the average price is for a home within that area, what the competition offers and what refurbished homes are being sold for. Remember to compare like with like, as the price a refurbished home can be sold for largely depends upon the quality of the work done and the targeted market.

Things to avoid

If buying a house in a student area, be aware that many of the properties in that district may be bedsits or apartments for students. The landlords of these properties may not have refurbished to the same standard as those owners who are looking to resell property to business people.

Don’t buy property that is restricted by neighborhood conditions. Updating a house or an apartment in a city setting won’t necessarily make you profit if you are unaware of the environment the house is situated in. Ask yourself if it is an area likely to be updated to any extent and if what you see in the area is likely to stagnate and stay the same.

The clues are out there

Look where developers are moving in, sometimes in droves, to claim their little piece of the property market. Development companies don’t buy “red herrings”. The research they will have done in advance of buying will have included projecting costs and potential profits. That little house next door to the development that looks very sad and neglected may just be a very desirable residence once the development is finished. It may take time to actually realise the potential of that investment, though if the price is right, this buys you time to renovate and refurbish the house.

If you see scaffolding on the front of a building, this is a clue. Ask the developers if you can see the plans for the building. They will have blueprints and may even show you what the finished project will look like. This will help you to decide if an urban development is something that you could take on.

Looking to the future

Old streets are being transformed into desirable residences. Take a look at what can be done within the limits of your budget. It really is a good time to think about whether your money will make more of an impact by investing in real estate, rather than depending upon the low interest rates offered by banks.

However, if you have to borrow money to buy that urban real estate project, you also need to remember that you are going to have payments to make during a time when you are not making money from that property. All of this needs to be calculated so that the budget for the development is kept at an affordable price.

There will always be hidden costs, so when estimating the cost of refurbishment, err on the high side to help you stay on target. If you are organized, know your areas and can see an investment opportunity within your geographic location, then it’s worth looking in to. This isn’t a task for the unwary or the inexperienced. The house will need to meet codes and be in a marketable area. If you get it right though, there is much money to be made from your initial investment.