{"appState":{"pageLoadApiCallsStatus":true},"categoryState":{"relatedCategories":{"headers":{"timestamp":"2022-06-27T18:31:17+00:00"},"categoryId":34299,"data":{"title":"Real Estate","slug":"real-estate","image":{"src":null,"width":0,"height":0},"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"parentCategory":{"categoryId":34288,"title":"Investing","slug":"investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"}},"childCategories":[],"description":"Find a fixer-upper, a dream home, a place to retire, a vacation getaway, or any other piece of real estate you desire. 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He practised as a real estate and business lawyer for many years and has written numerous bestselling real estate, business, and personal finance books. His website is homebuyer.ca.</p> <p><b><b data-author-id=\"33473\">Peter Mitham</b></b> has more than 20 years' experience writing about Canadian real estate for national and international publications.</p> <p><b><b data-author-id=\"33472\">Douglas Gray</b>, LLB,</b> is one of the foremost experts on real estate in Canada. He practised as a real estate and business lawyer for many years and has written numerous bestselling real estate, business, and personal finance books. His website is homebuyer.ca.</p> <p><b>Peter Mitham</b> has more than 20 years' experience writing about Canadian real estate for national and international publications.</p>","authors":[{"authorId":33473,"name":"Peter Mitham","slug":"peter-mitham","description":" <p><b>Douglas Gray, LLB,</b> is one of the foremost experts on real estate in Canada. 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His website is homebuyer.ca.</p> <p><b>Peter Mitham</b> has more than 20 years' experience writing about Canadian real estate for national and international publications.</p>","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33472"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119648420&quot;]}]\" id=\"du-slot-62b36f7ad968d\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119648420&quot;]}]\" id=\"du-slot-62b36f7ad9d9b\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":191749,"title":"Real Estate Investing Terms for Canadians","slug":"real-estate-investing-terms-for-canadians","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/191749"}},{"articleId":191748,"title":"Scouting Canadian Properties for your Real Estate Investing Portfolio","slug":"scouting-canadian-properties-for-your-real-estate-investing-portfolio","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/191748"}},{"articleId":191745,"title":"Finding Canadian Real Estate Investing Help","slug":"finding-canadian-real-estate-investing-help","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/191745"}}],"content":[{"title":"Investing in real estate: From dream to reality","thumb":null,"image":null,"content":"<p>From scouting properties to making your investment, some of the common steps you’ll take as a real estate investor include the following:</p>\n<ul>\n<li><strong>Get ready. </strong>Determine what you’re looking for in a property and which type of property best matches your expertise, investment criteria, and goals.</li>\n<li><strong>Get help.</strong> Select a mentor to guide you through your first property investment. Choose a real estate agent who has experience working with investors to identify potential listings and represent your interests to a vendor. Depending on the purchase, you may also wish to enlist an accountant, financial planner lawyer, appraiser, and other advisers.</li>\n<li><strong>Get financing.</strong> Determine the amount of mortgage financing for which you qualify and the amount of debt you’re comfortable carrying. After you’ve figured out your mortgage preferences, obtain pre-approval for mortgage financing from your financial institution or a mortgage broker.</li>\n<li><strong>Get focused. </strong>Determine where you want to invest and research the options available in the target geographic area. Shortlist properties of interest, noting the pros and cons of each with the help of your advisers. Arrange to view shortlisted properties to confirm or correct your initial impressions.</li>\n<li><strong>Get moving. </strong>Draft an offer for the property with the assistance of your real estate agent and the lawyer you’ve engaged to oversee the transaction. With their advice, include appropriate conditions in your offer that will both satisfy outstanding concerns you may have about the property or your ability to secure adequate financing. Determine the potential costs of closing the deal and budget for them.</li>\n<li><strong>Get answers.</strong> Proceed with due diligence and don’t remove any conditions on the sale until you’re fully satisfied with the purchase. This includes ensuring the property inspection is satisfactory and that all outstanding concerns with regards to title are clear. Obtain title insurance for additional security and peace of mind.</li>\n<li><strong>Get investing. </strong>Proceed with the property purchase, close the transaction, and take possession. Depending on the kind of property you’ve bought, you may be moving in and renting out the basement, or introducing yourself to the tenants and working to make their lives better and your property more profitable.</li>\n</ul>\n"},{"title":"Real estate investing terms for Canadians","thumb":null,"image":null,"content":"<p>Wondering what the acronyms CREA, MLS, or CMHC stand for? Decode the real estate jargon and brush up on your real estate investing vocabulary with these key terms:</p>\n<ul>\n<li><strong>Adjusted cost base (ACB):</strong> The value of the real property established for tax purposes. This equation can help you understand how it’s calculated:</li>\n</ul>\n<blockquote><p>Original Cost + Allowable Capital Improvements + Certain Acquisition Costs + Mortgage Interest Costs – Depreciation</p></blockquote>\n<ul>\n<li><strong>Amortization period:</strong> The actual number of years it will take to repay a mortgage loan in full. It can be well in excess of the loan’s term. For example, mortgages often have 5-year terms but 25-year amortization periods.</li>\n<li><strong>Canada Mortgage and Housing Corporation (CMHC):</strong> The federal Crown corporation that administers the National Housing Act. CMHC services include providing housing information and assistance, financing, and insuring home-purchase loans for lenders.</li>\n<li><strong>Capitalization (cap) rate:</strong> The percentage of return on an investment when purchased on a free-and-clear or all-cash basis.</li>\n<li><strong>Equity:</strong> The dollar-amount difference between the fair-market price for which a property could be sold and the total debts registered against it.</li>\n<li><strong>Multiple Listing Service (MLS):</strong> A service licensed to member real estate boards by the Canadian Real Estate Association. The MLS aggregates information about properties listed for sale.</li>\n<li><strong>Pyramiding:</strong> The process of building real estate wealth by allowing appreciation and mortgage principal reduction to increase the investors’ equity in a portfolio of properties.</li>\n<li><strong>Title insurance: </strong>This insurance covers the purchaser or vendor in case of any defects in the property or title that existed at the time of sale but weren’t known until after the sale.</li>\n</ul>\n"},{"title":"Scouting Canadian properties for your real estate investing portfolio","thumb":null,"image":null,"content":"<p>Considering a few practical elements may help you choose between an adorable rental property in the middle of nowhere or a tear-down shack with long-term potential. Keep these factors in mind when you’re evaluating a property:</p>\n<ul>\n<li><strong>Price:</strong> Compare the asking price of a property to the average sale price for similar properties in the same area. An undervalued property in a good neighbourhood stands a better chance of rising in value than an overpriced home in a neighbourhood that’s going nowhere.</li>\n<li><strong>Condition:</strong> You may be getting a great deal on a property, but if you haven’t counted on the cost of long-overdue maintenance, you may face a losing proposition. You may be able to make something of a property, but if the cost of improvements cancel the potential return, what’s the point?</li>\n<li><strong>Cash flow:</strong> Research the potential to attract tenants to a property if you’re counting on cash flow from your investment property. Remember to balance the projected revenue against operating costs to ensure your income stays ahead of expenses.</li>\n</ul>\n"},{"title":"Finding Canadian Real Estate Investing Help","thumb":null,"image":null,"content":"<p>Whether you’re looking for the latest information on housing starts, rental rates, or mortgage rates, the following sites can provide the information you need to keep pace with the market:</p>\n<ul>\n<li><strong><a href=\"http://www.cmhc.ca/\" target=\"_blank\" rel=\"noopener\">Canada Mortgage and Housing Corp.</a>:</strong> Need to know how many homes are being built in your area or what rental rates are like? Need information on financing and incentives for renovations? You can find it all and much more here.</li>\n<li><strong><a href=\"http://www.crea.ca/\" target=\"_blank\" rel=\"noopener\">Canadian Real Estate Association</a>:</strong> Get connected with your local real estate association, find property listings, and discover what it takes to sell real estate. Packed with useful information, this site is an online primer for home buyers and the residential properties.</li>\n<li><strong><a href=\"http://www.bankofcanada.ca/\" target=\"_blank\" rel=\"noopener\">Bank of Canada</a>:</strong> The online home of Canada’s central bank. You can find key information here regarding interest rate trends, fiscal analyses, and calculators to help you calculate the impact of inflation on your investments.</li>\n<li><strong><a href=\"http://www.ratehub.ca/\" target=\"_blank\" rel=\"noopener\">RateHub</a>: </strong>Whether you’re shopping around for a mortgage or sizing up historical trends and future options, the data aggregated here provides a snapshot of current mortgage rates at major lenders and calculators needed to figure out which one will suit your needs.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-03-24T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":208920},{"headers":{"creationTime":"2016-03-27T16:48:13+00:00","modifiedTime":"2022-03-10T15:16:01+00:00","timestamp":"2022-06-22T19:37:25+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"Commercial Real Estate Investing For Dummies Cheat Sheet","strippedTitle":"commercial real estate investing for dummies cheat sheet","slug":"commercial-real-estate-investing-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Learn the important terms in the commercial estate world, as well as how deals are closed and three due-diligence checklists.","noIndex":0,"noFollow":0},"content":"Use this handy Cheat Sheet to learn how to sound like a pro real estate investor (even if you’re just getting started.) Then keep it on hand to make sure you’re staying on top of every commercial property you acquire!","description":"Use this handy Cheat Sheet to learn how to sound like a pro real estate investor (even if you’re just getting started.) Then keep it on hand to make sure you’re staying on top of every commercial property you acquire!","blurb":"","authors":[{"authorId":9462,"name":"Peter Conti","slug":"peter-conti","description":" <p><b>Peter Conti</b> bought his first commercial property in 1990. He coaches beginner investors on commercial real estate investment. He founded RealEstate101.com.</p> <p><b>Peter Harris</b> is the Director of Education at Commercial Property Advisors. He has personally mentored hundreds of commercial real estate investors nationwide since 2003. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9462"}},{"authorId":9463,"name":"Peter Harris","slug":"peter-harris","description":" <p><b>Peter Conti</b> bought his first commercial property in 1990. 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He coaches beginner investors on commercial real estate investment. He founded RealEstate101.com.</p> <p><b>Peter Harris</b> is the Director of Education at Commercial Property Advisors. He has personally mentored hundreds of commercial real estate investors nationwide since 2003. <p><b>Peter Conti</b> bought his first commercial property in 1990. He coaches beginner investors on commercial real estate investment. He founded RealEstate101.com.</p> <p><b><b data-author-id=\"9463\">Peter Harris</b></b> is the Director of Education at Commercial Property Advisors. He has personally mentored hundreds of commercial real estate investors nationwide since 2003.</p>","authors":[{"authorId":9462,"name":"Peter Conti","slug":"peter-conti","description":" <p><b>Peter Conti</b> bought his first commercial property in 1990. He coaches beginner investors on commercial real estate investment. He founded RealEstate101.com.</p> <p><b>Peter Harris</b> is the Director of Education at Commercial Property Advisors. He has personally mentored hundreds of commercial real estate investors nationwide since 2003. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9462"}},{"authorId":9463,"name":"Peter Harris","slug":"peter-harris","description":" <p><b>Peter Conti</b> bought his first commercial property in 1990. He coaches beginner investors on commercial real estate investment. He founded RealEstate101.com.</p> <p><b>Peter Harris</b> is the Director of Education at Commercial Property Advisors. He has personally mentored hundreds of commercial real estate investors nationwide since 2003. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9463"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119858485&quot;]}]\" id=\"du-slot-62b36f7526c77\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119858485&quot;]}]\" id=\"du-slot-62b36f752751c\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":154598,"title":"Ways to Mitigate Risk in Commercial Real Estate Investments","slug":"ways-to-mitigate-risk-in-commercial-real-estate-investments","categoryList":["business-careers-money","careers","real-estate-careers","general-real-estate-careers"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/154598"}},{"articleId":154599,"title":"Myths and Questions about Investing in Commercial Real Estate","slug":"myths-and-questions-about-investing-in-commercial-real-estate","categoryList":["business-careers-money","careers","real-estate-careers","general-real-estate-careers"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/154599"}},{"articleId":154600,"title":"Commercial Real Estate Due Diligence","slug":"commercial-real-estate-due-diligence","categoryList":["business-careers-money","careers","real-estate-careers","general-real-estate-careers"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/154600"}}],"content":[{"title":"Commercial real estate terms you should know","thumb":null,"image":null,"content":"<p>Here are some terms you need to know as you develop your knowledge of commercial real estate:</p>\n<ul>\n<li><strong>Gross income: </strong>Gross income is all your income, including rents, laundry or vending machine income, and late fees. It can be monthly or annual.</li>\n<li><strong>Vacancy: </strong>A vacancy is any unit that is left unoccupied and is not producing income. <strong>Note</strong>: A unit that is vacated and re-rented in the same month is not considered a vacancy; it is considered a<em> turnover.</em></li>\n<li><strong>Vacancy rate: </strong>The number of vacancies divided by the number of units: vacancy rate (%) = total vacant units @@ds # of total units</li>\n<li><strong>Effective gross income: </strong>Gross income minus vacancy: effective gross income = income – (vacancy rate % @@ts income)</li>\n<li><strong>Operating expenses: </strong>Annual operating expenses of the property, which typically include taxes, insurance, utilities, management fees, payroll, landscaping, maintenance, and repairs. This does not include mortgage payments or interest expense.</li>\n<li><strong>Net operating income (NOI): </strong>Effective gross income minus operating expenses: net operating income = effective gross income – operating expenses</li>\n<li><strong>Debt service: </strong>Monthly mortgage amount times 12 months: debt service = monthly mortgage amount @@ts 12</li>\n<li><strong>Cash flow: </strong>Net operating income minus debt service: annual cash flow = net operating income – debt service monthly cash flow = annual cash flow @@ds 12</li>\n<li><strong>Cash-on-cash return: </strong>Annual cash flow divided by down payment amount: cash-on-cash return = annual cash flow @@ds down payment</li>\n<li><strong>Capitalization rate: </strong>Net operating income divided by the sales price. Also known as the <em>cap rate,</em> it is the measure of profitability of an investment. Cap rates tell you how much you’d make on an investment if you paid all cash for it; financing and taxation are not included. cap rate = net operating income @@ds sales price</li>\n</ul>\n"},{"title":"How a real estate deal is closed","thumb":null,"image":null,"content":"<p>These steps in this big-picture view helps you understand how a deal is closed:</p>\n<ol>\n<li>The buyer makes an offer to purchase and, if the seller likes the offer, the seller accepts and signs it.</li>\n<li>The buyer opens escrow with an escrow/title company or attorney and sends in-earnest money as a deposit to the escrow holder.</li>\n<li>The buyer starts the financing process with his lender and sends necessary documents to the lender to qualify both the property and himself (and his partners).</li>\n<li>The buyer does his due diligence (such as reviewing the property’s financial statements and other property-related information as set forth in the contract) and does a physical inspection of the property.</li>\n<li>The buyer examines the title and removes contract contingencies.</li>\n<li>The buyer and seller satisfy any remaining obligations as set forth in the contract.</li>\n<li>The buyer finalizes the loan with the lender by getting an official letter of commitment from the lender.</li>\n<li>The buyer reviews the closing statement and finalizes any final closing instructions with the escrow company.</li>\n<li>On closing day, the buyer signs the closing paperwork with the escrow company and makes a down payment.</li>\n<li>The deed is recorded, monies are disbursed, and the seller gets the keys.</li>\n</ol>\n"},{"title":"Physical due diligence checklist","thumb":null,"image":null,"content":"<p><em>Due diligence</em> is the process of “doing your homework” on the property that you’re thinking about buying as an investment. When investors consider <em>physical</em> due diligence, they need to do more than a simple walk-through of the property with an inspector. Walk-throughs are a part of physical due diligence, but only a tiny part of it. Ask the seller for the following items:</p>\n<ul>\n<li><strong>Site plans and specifications: </strong>This group of documents includes all of the construction documents, building plans and schematics, floor plans, and use of the land documents.</li>\n<li><strong>Photos of the property:</strong> Photos of the exteriors, interiors, and the surrounding land and structures should be taken.</li>\n<li><strong>A structural inspection: </strong>Inspect the walls, roofs, and foundation, and make sure there are implements in place for earthquake safety.</li>\n<li><strong>An interior systems inspection:</strong> Inspect the interior of the property for wear and tear, including items such as doors, windows, and weatherproofing. Then inquire about the age of the roof, any building code violations, its federal compliance, and site improvements.</li>\n<li><strong>A mechanical and electrical inspection:</strong> Make sure that every mechanical and electrical system is inspected. Such systems include heating, ventilation, air conditioning, plumbing systems, and all electrical power systems and controls.</li>\n<li><strong>A list of capital improvements performed:</strong> Obtain receipts and documents for any capital improvements that were made. Collect these for any improvements over the past five years.</li>\n<li><strong>A pest inspection:</strong> On some types of building, an inspection for pests, such as termites, may take place. Most apartment buildings have this inspection done as part of a lender requirement.</li>\n</ul>\n"},{"title":"Financial due diligence checklist","thumb":null,"image":null,"content":"<p>The financial aspect of due diligence focuses on why you’re buying the property. It helps ensure that you make money by verifying the seller records of the property’s financial performance. To perform successful financial due diligence, be sure to obtain the following from the seller:</p>\n<ul>\n<li><strong>Income and expense statements:</strong> You should at least obtain annual income and expense statements for the past three years. Also, get all of last years’ monthly profit and loss statements and review the balance sheet for the past three years.</li>\n<li><strong>Rent rolls: </strong>A <em>rent roll</em> is essentially an attendance sheet for all of the tenants. It displays the tenant’s name, unit space, amount of rent paid, move-in date, lease expiration date, and security deposit.</li>\n<li><strong>Tax returns: </strong>Obtain the property’s tax returns for the past three years. Add up all of the income and expenses shown on the tax returns. These numbers should match those from the seller’s income and expense statements.</li>\n<li><strong>Lease agreements:</strong> A lease agreement can be a complex legal document. If all of the leases are the same, such as in an apartment building, have an attorney review the first few to make sure they’re valid. For every other category of commercial real estate, we suggest verifying the leases by using an <em>estoppel letter.</em> This letter confirms that the lease is true and accurate and is the only agreement that’s made between the tenant and the owner.</li>\n<li><strong>Utility bills:</strong> Obtain the past two years’ worth of actual utility bills for the property. These bills include electricity, gas, water, sewer, trash, telephone, cable, and internet service bills. Compare the totals of each utility category to the seller’s total given on the expense statements.</li>\n<li><strong>Property tax bills: </strong>Obtain the past two years’ worth of property tax bills. Verify the amounts with those given on the seller’s expense statements.</li>\n</ul>\n"},{"title":"Legal due diligence checklist","thumb":null,"image":null,"content":"<p>Legal due diligence can be pretty extensive, and checking on the items in this list takes a team effort. Here are the items that you need to ask the seller for:</p>\n<ul>\n<li><strong>An environmental inspection:</strong> The environmental inspection most often used is called a Phase One Environment Site Assessment. During this inspection the inspector explores the past use of the property and the surrounding area, looking for onsite and offsite environmental problems and liabilities.</li>\n<li><strong>A survey and title inspection:</strong> With this inspection, a title company can verify the property size and that the title report has the same description as the survey. You can also review any easements or encroachments on the property that could drastically affect its value and use.</li>\n<li><strong>An inspection for building code violations:</strong> If a new building code causes a violation to occur after a building is built, it’s called <em>non-conforming use,</em> and is considered to be grandfathered in.</li>\n<li><strong>The zoning code:</strong> Every property has a specific use permitted. For example, a property can be zoned as residential or commercial. So, you need to review the city’s zoning ordinances to make sure that the property’s use complies with what it’s legally zoned for. If it’s used illegally, the property can be shut down.</li>\n<li><strong>The insurance policy: </strong>The property’s insurance policy can be a treasure trove of information if you can get the claims history.</li>\n<li><strong>Licenses, permits, or certificates:</strong> Oftentimes you’re required to post business licenses, permits, or certificates. Make sure that you’re proactive in notification of new ownership to avoid hefty fines.</li>\n<li><strong>Service and vendor contracts:</strong> Review all service and vendor contracts to make sure that you have the right to choose or discontinue the services. These types of services may include, among others, laundry machine servicing, maintenance and landscaping. Keep record of any equipment warranties and guarantees.</li>\n<li><strong>A personal property inventory:</strong> Obtain a list of all personal items, such as equipment, tools, computers, furniture, supplies, and appliances that are to remain behind with the new owner. Document all these personal items in writing or consider them gone.</li>\n<li><strong>Any police reports:</strong> Determine past and current police reports by calling the local police department or reviewing online crime statistics. Review the type and frequency of calls to the property. Know what’s going on before you buy.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-03-08T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207720},{"headers":{"creationTime":"2016-03-26T07:09:29+00:00","modifiedTime":"2022-03-07T21:38:37+00:00","timestamp":"2022-06-22T19:37:23+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"Addressing 10 Common Real Estate Investing Misconceptions","strippedTitle":"addressing 10 common real estate investing misconceptions","slug":"addressing-10-common-real-estate-investing-misconceptions","canonicalUrl":"","seo":{"metaDescription":"Buying a home is most people's first foray into the world of real estate. However, real estate can also be a good place to invest your money and see a profit. M","noIndex":0,"noFollow":0},"content":"Buying a home is most people's first foray into the world of real estate. However, real estate can also be a good place to invest your money and see a profit. More people invest in the stock market than invest in real estate (beyond the home in which they live). Some reasons for this are due to misconceptions. These misconceptions also cause some investors to see less-than-stellar returns on their real estate investments.\r\n\r\nHere are common real estate misconceptions followed by why they are wrong:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to be wealthy.</b> Although it's true that you need money to play the game of investing in real estate (for a down payment), you don't need millions or even hundreds of thousands of dollars to get started. A five-figure ($10,000+) savings balance provides a point of entry into good investment properties.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to be a high-income earner.</b> So often in the news we hear about the Donald Trumps and other big-income earners as the ones making big bucks investing in real estate. But there's no reason you need a million-dollar-plus income to invest successfully in property. You don't even need a $100,000+ income. Many folks begin investing in real estate while earning modest wages or salaries.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to have connections and know the \"right\" people.</b> You should certainly have a team of competent real estate professionals and contractors and suppliers, but anyone can assemble such a squad.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to be lucky to make big money.</b> A little bit of luck is always welcome of course, but the key to making money with real estate investing is to do your homework. Find the right property in the right location, acquire that property at a fair price, and successfully manage all of your properties well over time.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>It doesn't matter who you rent your property to as long as you keep the property occupied.</b> Real estate investors often overlook or downplay the importance of tenant selection. Properly preparing the property to attract the most qualified prospective tenants and then targeting your advertising to that target market are the first two steps to increasing your odds of finding a qualified tenant. You want to look for tenants who will stay for the long term, treat your property with care and respect, and essentially make your mortgage payments for you and build up your equity.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>It's not worth investing in real estate unless you buy can a large property.</b> False! Most people who invest in real estate get started with small, less costly properties. Bigger and more expensive properties typically come many years down the road.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>The collapse in real estate prices before and during the 2008 financial crisis shows real estate isn't a good investment. </b>Real estate, like stocks and other ownership-type investments, goes through cycles. But if you do your homework and buy solid properties at fair prices and manage them well over time, you should earn solid returns. Also, keep in mind that values of different types of properties in various locations don't all move in lockstep.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>The best way to make money in real estate is to buy and flip properties, especially if you can renovate them.</b> Holding a property for a relatively short period of time ensures that your transaction costs of buying and then selling will consume a large portion or even all of your profits. Also, your profits may end up being taxed at higher tax rates for shorter holding periods.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Once you own several properties, you can enjoy sitting back while the profits roll in.</b> Wrong! Managing rental properties and doing it well takes time and resourcefulness. There are no shortcuts, especially if you want to avoid unpleasant surprises and make the most of your properties.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You should always buy small properties to add to your holdings and continue to manage these multiple rentals.</b> Acquiring small properties to begin your real estate investing career certainly makes sense, and you can do quite well over many years. But at some point, you should seriously consider selling some of the smaller properties and consolidating your real estate holdings into larger properties.</p>\r\n<p class=\"child-para\">Take the equity you have built up over time in the small properties and use it to purchase medium to larger properties. By selling several smaller properties and buying a larger one, you can take advantage of the economies of scale that a larger property offers. With larger properties, either you can manage them or you can hire professional management if you want to avoid the day-to-day headaches often associated with tenants, maintenance, and upkeep.</p>\r\n</li>\r\n</ul>","description":"Buying a home is most people's first foray into the world of real estate. However, real estate can also be a good place to invest your money and see a profit. More people invest in the stock market than invest in real estate (beyond the home in which they live). Some reasons for this are due to misconceptions. These misconceptions also cause some investors to see less-than-stellar returns on their real estate investments.\r\n\r\nHere are common real estate misconceptions followed by why they are wrong:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to be wealthy.</b> Although it's true that you need money to play the game of investing in real estate (for a down payment), you don't need millions or even hundreds of thousands of dollars to get started. A five-figure ($10,000+) savings balance provides a point of entry into good investment properties.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to be a high-income earner.</b> So often in the news we hear about the Donald Trumps and other big-income earners as the ones making big bucks investing in real estate. But there's no reason you need a million-dollar-plus income to invest successfully in property. You don't even need a $100,000+ income. Many folks begin investing in real estate while earning modest wages or salaries.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to have connections and know the \"right\" people.</b> You should certainly have a team of competent real estate professionals and contractors and suppliers, but anyone can assemble such a squad.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You need to be lucky to make big money.</b> A little bit of luck is always welcome of course, but the key to making money with real estate investing is to do your homework. Find the right property in the right location, acquire that property at a fair price, and successfully manage all of your properties well over time.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>It doesn't matter who you rent your property to as long as you keep the property occupied.</b> Real estate investors often overlook or downplay the importance of tenant selection. Properly preparing the property to attract the most qualified prospective tenants and then targeting your advertising to that target market are the first two steps to increasing your odds of finding a qualified tenant. You want to look for tenants who will stay for the long term, treat your property with care and respect, and essentially make your mortgage payments for you and build up your equity.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>It's not worth investing in real estate unless you buy can a large property.</b> False! Most people who invest in real estate get started with small, less costly properties. Bigger and more expensive properties typically come many years down the road.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>The collapse in real estate prices before and during the 2008 financial crisis shows real estate isn't a good investment. </b>Real estate, like stocks and other ownership-type investments, goes through cycles. But if you do your homework and buy solid properties at fair prices and manage them well over time, you should earn solid returns. Also, keep in mind that values of different types of properties in various locations don't all move in lockstep.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>The best way to make money in real estate is to buy and flip properties, especially if you can renovate them.</b> Holding a property for a relatively short period of time ensures that your transaction costs of buying and then selling will consume a large portion or even all of your profits. Also, your profits may end up being taxed at higher tax rates for shorter holding periods.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Once you own several properties, you can enjoy sitting back while the profits roll in.</b> Wrong! Managing rental properties and doing it well takes time and resourcefulness. There are no shortcuts, especially if you want to avoid unpleasant surprises and make the most of your properties.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>You should always buy small properties to add to your holdings and continue to manage these multiple rentals.</b> Acquiring small properties to begin your real estate investing career certainly makes sense, and you can do quite well over many years. But at some point, you should seriously consider selling some of the smaller properties and consolidating your real estate holdings into larger properties.</p>\r\n<p class=\"child-para\">Take the equity you have built up over time in the small properties and use it to purchase medium to larger properties. By selling several smaller properties and buying a larger one, you can take advantage of the economies of scale that a larger property offers. With larger properties, either you can manage them or you can hire professional management if you want to avoid the day-to-day headaches often associated with tenants, maintenance, and upkeep.</p>\r\n</li>\r\n</ul>","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}},{"authorId":8976,"name":"Ray Brown","slug":"ray-brown","description":" <p><b>Eric Tyson, MBA,</b> is the author of <i>Investing For Dummies, Personal Finance For Dummies,</i> and <i>Investing in Your 20s and 30s For Dummies</i>. <b>Ray Brown,</b> a real estate professional for more than 40 years, is the best&#45;selling co&#45;author of <i>Home Buying For Dummies</i>. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8976"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f73ba93c\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f73bb171\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2021-12-10T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":138529},{"headers":{"creationTime":"2022-03-01T17:49:36+00:00","modifiedTime":"2022-03-01T17:50:32+00:00","timestamp":"2022-06-22T19:37:21+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"Foreclosure Investing For Dummies Cheat Sheet","strippedTitle":"foreclosure investing for dummies cheat sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"This Cheat Sheet will get you up to speed in a hurry on foreclosure investing and help you steer clear of some of the major pitfalls.","noIndex":0,"noFollow":0},"content":"Foreclosure investing is complicated and risky. I’ve seen individual investors lose tens of thousands of dollars at a single auction simply because they had no idea what they were doing. You’re smart to study up on the process before putting any money on the line.\r\n\r\nThis Cheat Sheet will get you up to speed in a hurry on foreclosure investing and help you steer clear of some of the major pitfalls. However, I strongly encourage you to study up on the foreclosure process in the location (state and county) where you choose to invest, and hire an attorney with foreclosure experience to cover your back, at least for your first few investment properties.","description":"Foreclosure investing is complicated and risky. I’ve seen individual investors lose tens of thousands of dollars at a single auction simply because they had no idea what they were doing. You’re smart to study up on the process before putting any money on the line.\r\n\r\nThis Cheat Sheet will get you up to speed in a hurry on foreclosure investing and help you steer clear of some of the major pitfalls. However, I strongly encourage you to study up on the foreclosure process in the location (state and county) where you choose to invest, and hire an attorney with foreclosure experience to cover your back, at least for your first few investment properties.","blurb":"","authors":[{"authorId":9133,"name":"Ralph R. Roberts","slug":"ralph-r-roberts","description":"Ralph R. Roberts is a master at flipping houses, earning a profit even in the deeply depressed real estate market in Metro Detroit, Michigan. He is the award-winning author of several books, including Foreclosure Investing For Dummies.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9133"}},{"authorId":8993,"name":"Joseph Kraynak","slug":"joseph-kraynak","description":" <p><B>Ralph R. Roberts</b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8993"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}},{"articleId":266678,"title":"10 Steps to Real Estate Investing Success","slug":"10-steps-to-real-estate-investing-success","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266678"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282206,"slug":"foreclosure-investing-for-dummies","isbn":"9781119860983","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"amazon":{"default":"https://www.amazon.com/gp/product/1119860989/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119860989/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119860989-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119860989/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119860989/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119860983-203x255.jpg","width":203,"height":255},"title":"Foreclosure Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><B>Ralph R. Roberts</b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p> <p><B>Ralph R. Roberts</b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p> <p><B><b data-author-id=\"34818\">Ralph R. Roberts</b></b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p>","authors":[{"authorId":8993,"name":"Joseph Kraynak","slug":"joseph-kraynak","description":" <p><B>Ralph R. Roberts</b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8993"}},{"authorId":34819,"name":"Kyle Roberts","slug":"kyle-roberts","description":" <p><B>Ralph R. Roberts</b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34819"}},{"authorId":34818,"name":"Ralph R. Roberts","slug":"ralph-r.-roberts","description":" <p><B>Ralph R. Roberts</b> has been investing in foreclosed properties for over 30 years. He knows every step of the process, from scouting properties to cashing out after the sale, from helping distressed homeowners keep their homes to buying those homes when the owners can no longer afford them. He also has assisted homeowners who have been taken advantage of by unscrupulous investors.</p> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34818"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119860983&quot;]}]\" id=\"du-slot-62b36f71c43c8\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119860983&quot;]}]\" id=\"du-slot-62b36f71c4ba4\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":0,"title":"","slug":null,"categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/"}}],"content":[{"title":"Foreclosure investing preflight checklist","thumb":null,"image":null,"content":"<p>Before you place a bid or make an offer on a property, perform your due diligence and be prepared. In addition to having financing in place to cover the cost of purchase, holding costs, and repair and renovation expenses, create a file that contains the following items:</p>\n<ul>\n<li>Copy of foreclosure notice or notice of default, if available.</li>\n<li>The title commitment and 24-month history in the chain of title or the minimum last two recorded documents.</li>\n<li>A copy of the deed with the current homeowners’ names.</li>\n<li>The last recorded first mortgage, so you know how much the homeowners currently owe on the property.</li>\n<li>Full knowledge of all liens (financial claims) against the property, including property tax liens.</li>\n<li>A map showing the location of the property.</li>\n<li>Your exterior home inspection notes, photos of the house from all views, including from across the street, and neighborhood photos.</li>\n<li>The city worksheet on the property showing the history of any major renovations, inspection reports, or other details about the property.</li>\n<li>MLS listings of comparable properties that have recently sold or are currently for sale.</li>\n<li>Copy of the tax bills and notes on whether they are paid up or delinquent.</li>\n<li>The SEV (Standard Equalized Value) of the property, on which property taxes are based.</li>\n<li>Notes from meetings with homeowners, assuming you contacted them prior to foreclosure.</li>\n</ul>\n"},{"title":"Step-by-step investing in pre-foreclosures","thumb":null,"image":null,"content":"<p>Purchasing a home directly from the homeowners prior to the foreclosure auction often delivers the best deals, often because you’re not buying blind and you know exactly what you’re buying.</p>\n<p>The following list provides a brief overview of what can be a very complex process:</p>\n<ol>\n<li>Line up the financing required to make a cash offer on the property.</li>\n<li>Obtain a lead on a property either by word-of-mouth networking or reading the foreclosure listings in the county’s legal publication.</li>\n<li>Visit and inspect the property with your own two eyes.</li>\n<li>Research recent sales prices of comparable properties in the area.</li>\n<li>Research the property thoroughly, especially the title work.</li>\n<li>Establish contact with the homeowners by way of an in-person visit, phone call, or letter.</li>\n<li>Meet with the homeowners (if possible) and gather as much pertinent information as possible. Obtain written permission to contact the lien holders.</li>\n<li>Present all options to the homeowners.</li>\n<li>Work with the homeowners and lien holders to negotiate a compromise that addresses the needs of all parties @@md you, the homeowners, and the lenders.</li>\n<li>Present a purchase offer to the homeowners.</li>\n<li>Close on the property.</li>\n</ol>\n"},{"title":"Steps for buying properties at foreclosure auctions","thumb":null,"image":null,"content":"<p>Bidding on and buying properties at foreclosure auctions sounds easy enough, but doing it successfully often requires several weeks of preparation and a detailed follow-through.</p>\n<p>The following list provides a basic step-by-step overview of the process:</p>\n<ul>\n<li>Attend four or five auctions to get acclimated to the bidding process and determine the proof of financing and other conditions required to bid at auctions.</li>\n<li>Line up the financing required to make a cash offer on the property.</li>\n<li>Identify a potential investment property in the foreclosure listings in the county’s legal publication. Track the listing weekly all the way up to the date of the foreclosure auction, including adjournments.</li>\n<li>Visit and inspect the property with your own two eyes and take photos.</li>\n<li>Research recent sales prices of comparable properties in the area.</li>\n<li>Order the title work on the property from your local title company and review the document thoroughly.</li>\n<li>Obtain and review property records from the city or county.</li>\n<li>Contact the foreclosing attorney several days prior to the scheduled auction date. (The attorney’s name and contact information are on the foreclosure notice.) Find out whether:\n<ul>\n<li>The attorney has an assistant you should contact in the future.</li>\n<li>The property is still going to be auctioned.</li>\n<li>An opening bid has been set and, if so, the amount.</li>\n<li>They are considering an adjournment.</li>\n</ul>\n</li>\n<li>Drive by the home a few hours before the auction and take new photos of the property if its condition has changed significantly. (If the house has burned down, you may end up buying ashes.)</li>\n<li>If you decide to bid on the property, obtain a cashier’s check for the amount of the opening bid.</li>\n<li>Organize your property file for the foreclosure auction.</li>\n<li>Set the absolute maximum amount you can afford to bid on the property to ensure a 20 percent or better return on your investment in excess of all estimated costs, including holding costs (interest, insurance, property taxes, homeowner association fees, and so on for the duration of the project).</li>\n<li>Attend the foreclosure auction and bid on the property, if desired, being careful not to bid in excess of your predetermined maximum.</li>\n<li>If you offer the winning bid, do the following as soon as possible:\n<ul>\n<li>Pay any balance remaining on the bid amount.</li>\n<li>Record the deed.</li>\n<li>Obtain an insurance policy for the property and record an affidavit for the amount paid.</li>\n<li>Pay any property taxes owed on the property and record an affidavit for the amount paid.</li>\n</ul>\n</li>\n<li>If your area has a mandatory redemption period, do the following:\n<ul>\n<li>Send a letter to the homeowners explaining what happened at the mortgage sale, the options you can offer, and their redemption rights, and warn them of other investors who may try to take advantage of them.</li>\n<li>If you bid more than required to pay off the liens, let the homeowners know that they can claim the overbid money and where to go to claim it.</li>\n<li>Establish contact with the homeowners, if possible, to smooth the change of ownership.</li>\n<li>Wait until the redemption period expires.</li>\n</ul>\n</li>\n<li>Encourage the homeowners to move out or proceed with an eviction.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-03-01T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":291208},{"headers":{"creationTime":"2019-07-31T18:35:25+00:00","modifiedTime":"2021-09-20T20:37:18+00:00","timestamp":"2022-06-22T19:36:48+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"What is Passive Income?","strippedTitle":"what is passive income?","slug":"what-is-passive-income","canonicalUrl":"","seo":{"metaDescription":"Don't work hard for your money, make your money work for you. Follow this quick guide on passive income and start building real wealth.","noIndex":0,"noFollow":0},"content":"Passive income is the key to building real wealth. Think of passive income as another name for <em>yield</em> (the money you make on an investment). What makes it <em>passive</em> is that, after it’s up and running, the investment requires minimal input from you for the income, or <em>yield,</em> to keep coming in, month after month.\r\n\r\n[caption id=\"attachment_288045\" align=\"alignnone\" width=\"630\"]<img class=\"wp-image-288045 size-full\" src=\"https://www.dummies.com/wp-content/uploads/passive-income.jpg\" alt=\"\" width=\"630\" height=\"473\" /> @ Aidan Hancock / Unsplash.com[/caption]\r\n\r\nIn other words, you invest some of your time and money upfront, and you get money back in return on a regular basis. Your money starts working for you, not the other way around. Sounds good, right?\r\n\r\nWhen people think of making money through real estate, their first thought is often capital growth (for example, buying a property for $200,000 and selling it six months later for $270,000). That’s a solid approach to making money, and capital growth projects certainly can make up part of any portfolio.\r\n<p class=\"article-tips remember\">If you’re going to treat your property portfolio as a business, you need to think about income, as well as capital growth. Investing for income tends to be less risky and more reliable than capital growth — because money in the bank this month, and next month, and the month after that is safer than relying on future growth.</p>\r\nThat’s not to say you won’t achieve capital growth alongside income. If you own a collection of rental and serviced accommodation properties, for instance, those properties will likely grow in value over time. In this way, capital growth is like a cherry on top of a delicious income sundae.\r\n\r\nGenerating income from real estate is so exciting because it’s relatively hands-off compared to, say, working 9 to 5 for a paycheck. In that way, it can be described as <em>passive income.</em>\r\n\r\nThe great Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.” So, if you like the idea of making money while you slumber (and, honestly, who doesn’t?), then the passive income mindset is for you.\r\n\r\nIt’s important to note that passive income isn’t just about making more money (although that is, of course, a big attraction). It’s not about greed. It’s about rethinking the fundamental nature of work and developing the means to live life your way. For you, it may mean putting in a few hours in the morning and having the rest of the day off, or having a four-day weekend, or never wearing a suit again! In short, passive income gives you more freedom — to do whatever you want.\r\n<p class=\"article-tips warning\">Passive income isn’t a get-rich-quick scheme. It takes time to build up a good level of passive income. So, if you’re looking to quit your job and devote yourself to real estate full time, it may be a while before you’re comfortable giving up the security of your existing income.</p>\r\n\r\n<h2 id=\"tab1\" >Examples of passive income</h2>\r\nAnything that generates money and isn’t directly tied to your effort or output (in the way of a regular job) is considered passive income. So, investing in the stock market can be considered passive income. So, too, can real estate.\r\n\r\nWhat’s great about real estate investing is that there are so many exciting sub-strategies for generating a regular income, including the following:\r\n<ul>\r\n \t<li>Property development</li>\r\n \t<li>Rent-to-rent</li>\r\n \t<li>Houses in multiple occupations</li>\r\n \t<li>Student and vacation rentals</li>\r\n</ul>\r\nIf you think passive income ventures like these require a lot of upfront capital, think again. Rent-to-rent, for instance, requires nothing more than the first month’s rent and deposit to get started — and sometimes less than that! In this way, property can offer a fairly low-capital route to passive income.\r\n\r\nThis is why I believe real estate is probably the most achievable path to passive income for the average person on the street. It can create serious wealth, too, if done right.\r\n<h2 id=\"tab2\" >Pros and cons of passive income</h2>\r\nHere are the pros and cons of passive income, as this author sees them. On the plus side passive income gives you:\r\n<ul>\r\n \t<li><strong>More time and freedom:</strong> Assuming you build up to a level of passive income where you no longer have to work 9 to 5, you have much more choice in how you live your life and more time for the things you love.</li>\r\n \t<li><strong>Better work-life balance:</strong> You can be there to take the kids to school and pick them up at the end of the day, and manage your real estate investments when it works for you.</li>\r\n \t<li><strong>The ability to indulge your passion — and your talents:</strong> Concentrating on passive income has allowed me to invest in projects that genuinely interest and excite me. You can spend time on the parts of the business you find most interesting or are the best use of your time. The rest you can outsource to people who are better qualified.</li>\r\n</ul>\r\nPassive income gives you the means to reach your full potential. What could be more satisfying than that? On the downside, with passive income:\r\n<ul>\r\n \t<li><strong>You have to take a longer-term view.</strong> Passive income isn’t about getting rich overnight. It’s about rethinking the way you work and earn money for the long haul.</li>\r\n \t<li><strong>There’s a cost to being more hands-off.</strong> As your portfolio grows, you’ll probably have to outsource some of your workload to other people and/or invest in technology to take care of certain tasks for you. This means sacrificing some of your income to cover these costs. For me, the additional cost is well worth it because it frees me up to focus on new opportunities and profit-enhancing activities.</li>\r\n \t<li><strong>You can’t get away with putting in zero effort.</strong> “Low” or “minimal” effort, sure. But not zero effort. You need to invest some time in your investments, both in terms of establishing your new projects and checking in on them regularly.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">When you’ve got a property up and running nicely, and you’re generating a regular income from it, don’t make the same mistake as a lot of investors and ignore the property. If things go wrong because you’ve stepped off the gas, you’ll have to devote lots of time and energy to get things back on track.</p>\r\nTo keep your investments on track, you’re far better off spending a little time often than spending a lot of time only occasionally.","description":"Passive income is the key to building real wealth. Think of passive income as another name for <em>yield</em> (the money you make on an investment). What makes it <em>passive</em> is that, after it’s up and running, the investment requires minimal input from you for the income, or <em>yield,</em> to keep coming in, month after month.\r\n\r\n[caption id=\"attachment_288045\" align=\"alignnone\" width=\"630\"]<img class=\"wp-image-288045 size-full\" src=\"https://www.dummies.com/wp-content/uploads/passive-income.jpg\" alt=\"\" width=\"630\" height=\"473\" /> @ Aidan Hancock / Unsplash.com[/caption]\r\n\r\nIn other words, you invest some of your time and money upfront, and you get money back in return on a regular basis. Your money starts working for you, not the other way around. Sounds good, right?\r\n\r\nWhen people think of making money through real estate, their first thought is often capital growth (for example, buying a property for $200,000 and selling it six months later for $270,000). That’s a solid approach to making money, and capital growth projects certainly can make up part of any portfolio.\r\n<p class=\"article-tips remember\">If you’re going to treat your property portfolio as a business, you need to think about income, as well as capital growth. Investing for income tends to be less risky and more reliable than capital growth — because money in the bank this month, and next month, and the month after that is safer than relying on future growth.</p>\r\nThat’s not to say you won’t achieve capital growth alongside income. If you own a collection of rental and serviced accommodation properties, for instance, those properties will likely grow in value over time. In this way, capital growth is like a cherry on top of a delicious income sundae.\r\n\r\nGenerating income from real estate is so exciting because it’s relatively hands-off compared to, say, working 9 to 5 for a paycheck. In that way, it can be described as <em>passive income.</em>\r\n\r\nThe great Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.” So, if you like the idea of making money while you slumber (and, honestly, who doesn’t?), then the passive income mindset is for you.\r\n\r\nIt’s important to note that passive income isn’t just about making more money (although that is, of course, a big attraction). It’s not about greed. It’s about rethinking the fundamental nature of work and developing the means to live life your way. For you, it may mean putting in a few hours in the morning and having the rest of the day off, or having a four-day weekend, or never wearing a suit again! In short, passive income gives you more freedom — to do whatever you want.\r\n<p class=\"article-tips warning\">Passive income isn’t a get-rich-quick scheme. It takes time to build up a good level of passive income. So, if you’re looking to quit your job and devote yourself to real estate full time, it may be a while before you’re comfortable giving up the security of your existing income.</p>\r\n\r\n<h2 id=\"tab1\" >Examples of passive income</h2>\r\nAnything that generates money and isn’t directly tied to your effort or output (in the way of a regular job) is considered passive income. So, investing in the stock market can be considered passive income. So, too, can real estate.\r\n\r\nWhat’s great about real estate investing is that there are so many exciting sub-strategies for generating a regular income, including the following:\r\n<ul>\r\n \t<li>Property development</li>\r\n \t<li>Rent-to-rent</li>\r\n \t<li>Houses in multiple occupations</li>\r\n \t<li>Student and vacation rentals</li>\r\n</ul>\r\nIf you think passive income ventures like these require a lot of upfront capital, think again. Rent-to-rent, for instance, requires nothing more than the first month’s rent and deposit to get started — and sometimes less than that! In this way, property can offer a fairly low-capital route to passive income.\r\n\r\nThis is why I believe real estate is probably the most achievable path to passive income for the average person on the street. It can create serious wealth, too, if done right.\r\n<h2 id=\"tab2\" >Pros and cons of passive income</h2>\r\nHere are the pros and cons of passive income, as this author sees them. On the plus side passive income gives you:\r\n<ul>\r\n \t<li><strong>More time and freedom:</strong> Assuming you build up to a level of passive income where you no longer have to work 9 to 5, you have much more choice in how you live your life and more time for the things you love.</li>\r\n \t<li><strong>Better work-life balance:</strong> You can be there to take the kids to school and pick them up at the end of the day, and manage your real estate investments when it works for you.</li>\r\n \t<li><strong>The ability to indulge your passion — and your talents:</strong> Concentrating on passive income has allowed me to invest in projects that genuinely interest and excite me. You can spend time on the parts of the business you find most interesting or are the best use of your time. The rest you can outsource to people who are better qualified.</li>\r\n</ul>\r\nPassive income gives you the means to reach your full potential. What could be more satisfying than that? On the downside, with passive income:\r\n<ul>\r\n \t<li><strong>You have to take a longer-term view.</strong> Passive income isn’t about getting rich overnight. It’s about rethinking the way you work and earn money for the long haul.</li>\r\n \t<li><strong>There’s a cost to being more hands-off.</strong> As your portfolio grows, you’ll probably have to outsource some of your workload to other people and/or invest in technology to take care of certain tasks for you. This means sacrificing some of your income to cover these costs. For me, the additional cost is well worth it because it frees me up to focus on new opportunities and profit-enhancing activities.</li>\r\n \t<li><strong>You can’t get away with putting in zero effort.</strong> “Low” or “minimal” effort, sure. But not zero effort. You need to invest some time in your investments, both in terms of establishing your new projects and checking in on them regularly.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">When you’ve got a property up and running nicely, and you’re generating a regular income from it, don’t make the same mistake as a lot of investors and ignore the property. If things go wrong because you’ve stepped off the gas, you’ll have to devote lots of time and energy to get things back on track.</p>\r\nTo keep your investments on track, you’re far better off spending a little time often than spending a lot of time only occasionally.","blurb":"","authors":[{"authorId":21941,"name":"Nicholas Wallwork","slug":"nicholas-wallwork","description":" <p><b>Nicholas Wallwork</b> is a leading international real estate market commentator, entrepreneur, business leader, investor, developer, and author. In addition to heading several real estate and investment companies, he wrote <i>Investing in International Real Estate For Dummies</i> and has produced and presented real estate TV shows on the UK&#39;s Sky TV.</br> www.nicholaswallwork.com ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/21941"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Examples of passive income","target":"#tab1"},{"label":"Pros and cons of passive income","target":"#tab2"}],"relatedArticles":{"fromBook":[{"articleId":263187,"title":"3 Main Real Estate Valuation Methods","slug":"3-main-real-estate-valuation-methods","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263187"}},{"articleId":263182,"title":"What Is Real Estate Value and Valuation","slug":"what-is-real-estate-value-and-valuation","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263182"}},{"articleId":263177,"title":"How and Where to Educate Yourself on International Real Estate","slug":"how-and-where-to-educate-yourself-on-international-real-estate","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263177"}},{"articleId":263174,"title":"Real Estate Investment Strategies for a Credit Crunch","slug":"real-estate-investment-strategies-for-a-credit-crunch","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263174"}},{"articleId":263171,"title":"Real Estate Investment Strategies for a Boom Market","slug":"real-estate-investment-strategies-for-a-boom-market","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263171"}}],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282313,"slug":"investing-in-international-real-estate-for-dummies","isbn":"9781119527527","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"amazon":{"default":"https://www.amazon.com/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/111952752X-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/investing-in-international-real-estate-for-dummies-cover-9781119527527-203x255.jpg","width":203,"height":255},"title":"Investing in International Real Estate For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<p><b data-author-id=\"21941\">Nicholas Wallwork</b> is a successful entrepreneur, multimillionaire real estate investor, developer, and property and business mentor. He is known across all media channels as a highly respected authority in the real estate investment world and has an extensive and proven track record for delivering successful, high-return investments for his clients and students. Wallwork is dedicated to helping educate investors. Visit www.propertyforum.com/ real-estate-courses for upcoming companion courses to this book. </p>","authors":[{"authorId":21941,"name":"Nicholas Wallwork","slug":"nicholas-wallwork","description":" <p><b>Nicholas Wallwork</b> is a leading international real estate market commentator, entrepreneur, business leader, investor, developer, and author. In addition to heading several real estate and investment companies, he wrote <i>Investing in International Real Estate For Dummies</i> and has produced and presented real estate TV shows on the UK&#39;s Sky TV.</br> www.nicholaswallwork.com ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/21941"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[{"title":"BYOB (Be Your Own Boss)","slug":"for-the-entry-level-entrepreneur","collectionId":287568}],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119527527&quot;]}]\" id=\"du-slot-62b36f50d0307\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119527527&quot;]}]\" id=\"du-slot-62b36f50d0a70\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2021-08-31T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":263144},{"headers":{"creationTime":"2019-07-31T20:48:55+00:00","modifiedTime":"2021-05-26T14:12:03+00:00","timestamp":"2022-06-22T19:36:24+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"What Is Real Estate Value and Valuation","strippedTitle":"what is real estate value and valuation","slug":"what-is-real-estate-value-and-valuation","canonicalUrl":"","seo":{"metaDescription":"Learn how the value of real estate is defined, how value compares to price, who appraises a property, and the purpose of property appraisals.","noIndex":0,"noFollow":0},"content":"Value is easy, right? It’s the price you pay for a property? Well, it’s not quite that simple — price and value aren’t always the same thing.\r\n<p class=\"article-tips remember\"><em>Real estate appraisal</em> or <em>property valuation</em> is the process of determining what a property is actually worth. This may or may not be the same as its price.</p>\r\n<a href=\"https://www.dummies.com/personal-finance/estate-planning/how-to-find-an-appraiser-for-your-estate-or-trust/\">Appraisers</a> go under different names depending on where you are in the world; <em>real estate appraiser, property valuer,</em> and <em>chartered surveyor</em> are the most common names. The terms <em>appraiser, valuer,</em> and <em>surveyor</em> are used interchangeably.\r\n\r\n[caption id=\"attachment_263183\" align=\"alignnone\" width=\"535\"]<img class=\"size-full wp-image-263183\" src=\"https://www.dummies.com/wp-content/uploads/international-real-estate-appraisal.jpg\" alt=\"real estate appraisal\" width=\"535\" height=\"357\" /> ©Andrey_Popov/Shutterstock.com[/caption]\r\n<h2 id=\"tab1\" >Compare price to value in more detail</h2>\r\nA property’s <em>price</em> (how much the property costs to purchase) can be very different from its <em>value</em> (what the property is worth). For example, a property may actually be worth in the region of $300,000 but the seller may have an inflated idea of its value and insist on putting it on the market at $350,000 — or he may have been guided to set the price high by an especially greedy agent who wants a higher commission.\r\n\r\nA buyer with a firm grip on valuation will understand that $350,000 isn’t a fair market comparison for that property, and refuse to cough up. But an unsuspecting and inexperienced investor could fall into the trap and end up overpaying.\r\n\r\nThere are a number of reasons why a buyer may gladly pay a price that’s lower than the property’s value. The buyer could, for example, be buying a property from a family member, who is cutting her a favorable deal and pricing lower than the market value. Or it could be a distressed sale where the property is priced lower than it’s worth for a quick sale, or perhaps it’s being sold at auction and the bidding doesn’t reach the expected levels.\r\n\r\nA buyer may also be willing to pay <em>more</em> than a property’s market value in order to secure a particularly attractive investment in a highly competitive market. That’s right, sometimes an investor may have arrived at her own valuation that’s higher than the comparative market value, maybe because she plans on changing the use for a niche high-income strategy (like short-term rentals, for example).\r\n<p class=\"article-tips remember\">If, when you’re valuing a property, you’re using a different valuation method from the person doing the appraisal, you may well arrive at a different value. That’s not necessarily a cause for concern, as long as you’re sure of your own numbers.</p>\r\n\r\n<h2 id=\"tab2\" >The purpose of appraisals</h2>\r\nIn general, appraisals or valuations are used in a number of contexts, from dividing up assets during a divorce to taxation. But for the real estate investor, valuation is used to determine\r\n<ul>\r\n \t<li>How much you can borrow to purchase a property (because appraisals inform mortgage loans)</li>\r\n \t<li>How much you should reasonably expect to pay for a property</li>\r\n \t<li>How much a property could generate in ongoing income (where income is the investment goal)</li>\r\n \t<li>How much you could sell the property for after adding value (where capital growth is the investment goal)</li>\r\n</ul>\r\nValuation is particularly important in real estate because each property is different. As an asset class, property is unique. When you buy two shares of stock on the same day, both shares are identical. But that’s not the case with real estate.\r\n<p class=\"article-tips remember\">Even two properties on the same street can be very different. In fact, even two houses next to each other, even if they’re both identical in size and layout, will vary a great deal in terms of condition, fixtures, and fittings and presentation. Their value will differ accordingly.</p>\r\nValuation is also necessary because most people fund their investments through some sort of financing, like a mortgage. And when you’re borrowing the money to buy a property, the lender will want to know that the property is worth what it’s loaning you. If you default on the loan, forcing the lender to foreclose on the property and sell it, the lender wants to know that there’s enough equity in the property to get its money back. In this way, real estate valuation protects the bank, as well as you.\r\n<h2 id=\"tab3\" >Factors that influence property value</h2>\r\nSo, what kinds of factors impact a property’s value? The key factors are\r\n<ul>\r\n \t<li><strong>The size of the property:</strong> For example, it makes sense that a four-bedroom, three-bathroom house will be worth more than a two-bedroom, one-bathroom house in the same town.</li>\r\n \t<li><strong>The condition of the property:</strong> This is key because it’s how so many investors add value to a property. By renovating and improving a property, even if you’re not doing major structural remodeling, you can increase its value in a relatively short amount of time.</li>\r\n \t<li><strong>How the property is (or can be) used:</strong> For one thing, a commercial property will be valued differently from a residential property. What’s more, various usage restrictions may also impact the value. For example, if zoning restrictions mean it’s impossible to turn a commercial property into a luxury block of apartments, then that restriction may impact how much buyers are willing to pay.</li>\r\n \t<li><strong>The property’s location:</strong> Compare a four-bedroom, three-bathroom house with a smaller house in the same town and it makes sense that the bigger house is worth more. But things get foggier when you bring different locations into the mix. Compare that generous family home in Des Moines, Iowa, with a studio apartment in Midtown Manhattan and the smaller property is likely to be worth more. That’s because different locations are more desirable and valuable than others. Additional local factors like a nearby, highly rated public school or great transportation links can also drive up a property’s value.</li>\r\n \t<li><strong>Supply of property:</strong> A few years ago, there was a lot in the real estate news about Bulgarian apartments. Investors were piling into the country in droves, and new apartment buildings were being thrown up left, right, and center in coastal and ski resort towns. The result? A market that ended up with way more supply (new-build apartments) than demand (actual buyers) and apartment blocks sitting empty and unsold. Compare that with, say, a sought-after coastal village location in Cornwall, in England’s beautiful West Country, where supply of properties is relatively low. Because few properties come onto the market, their value is higher than if there was a deluge of available property.</li>\r\n \t<li><strong>Demand for property:</strong> Think back to the tiny studio apartment in Midtown Manhattan, and you can see how being in a buoyant real estate market, like New York, can impact a property’s value. In a market where there’s a wealth (pardon the pun) of motivated buyers keen to purchase property, combined with plenty of money to buy, demand goes up — and with it, market value.</li>\r\n</ul>\r\n<h2 id=\"tab4\" >Who values real estate?</h2>\r\nSo, who has a hand in deciding a property’s value? Depending on the circumstances, the following people may all be involved in the process at some point:\r\n<ul>\r\n \t<li><strong>Sellers:</strong> Plenty of sellers do their own homework on what their properties may be worth before they put them on the market. And, at the end of the day, it’s the seller who weighs the agent’s recommendation and agrees on the final price.</li>\r\n \t<li><strong>Buyers:</strong> Informed buyers do their own research and analysis, and reach their own conclusions on the fair price for properties.</li>\r\n \t<li><strong>Real estate brokers and agents:</strong> Any good real estate broker or agent knows her market inside and out, and she’ll have a really good handle on the likely value of a property. That said, it’s not uncommon for an agent to quote a higher valuation to get a seller’s business (and a juicier commission), even though this can result in an overpriced property languishing on the market for longer than it needs to. So, when an agent gives you a valuation, do your own homework to determine whether that’s a correct and fair price for your market.</li>\r\n \t<li><strong>Professional appraisers, valuers, or surveyors:</strong> Whenever you’re seeking funding to buy a property, the lender will send a professional appraiser to value the property. (By “professional,” I mean that many countries require appraisers to be qualified and certified.) Depending on the lender and type of funding, you may have some flexibility to appoint the appraiser yourself, or choose from a shortlist of the lender’s appraisers (this is not unusual on a commercial mortgage in the United Kingdom). Many times, though, the lender will simply appoint its own appraiser, and you’ll have no say in the matter. Either way, you’ll ideally have the option of being present at the valuation.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">Be aware that a lender-appointed appraiser may not have a ton of experience in your type of investment; for example, he may specialize in standard residential properties rather than income-generating rentals.</p>","description":"Value is easy, right? It’s the price you pay for a property? Well, it’s not quite that simple — price and value aren’t always the same thing.\r\n<p class=\"article-tips remember\"><em>Real estate appraisal</em> or <em>property valuation</em> is the process of determining what a property is actually worth. This may or may not be the same as its price.</p>\r\n<a href=\"https://www.dummies.com/personal-finance/estate-planning/how-to-find-an-appraiser-for-your-estate-or-trust/\">Appraisers</a> go under different names depending on where you are in the world; <em>real estate appraiser, property valuer,</em> and <em>chartered surveyor</em> are the most common names. The terms <em>appraiser, valuer,</em> and <em>surveyor</em> are used interchangeably.\r\n\r\n[caption id=\"attachment_263183\" align=\"alignnone\" width=\"535\"]<img class=\"size-full wp-image-263183\" src=\"https://www.dummies.com/wp-content/uploads/international-real-estate-appraisal.jpg\" alt=\"real estate appraisal\" width=\"535\" height=\"357\" /> ©Andrey_Popov/Shutterstock.com[/caption]\r\n<h2 id=\"tab1\" >Compare price to value in more detail</h2>\r\nA property’s <em>price</em> (how much the property costs to purchase) can be very different from its <em>value</em> (what the property is worth). For example, a property may actually be worth in the region of $300,000 but the seller may have an inflated idea of its value and insist on putting it on the market at $350,000 — or he may have been guided to set the price high by an especially greedy agent who wants a higher commission.\r\n\r\nA buyer with a firm grip on valuation will understand that $350,000 isn’t a fair market comparison for that property, and refuse to cough up. But an unsuspecting and inexperienced investor could fall into the trap and end up overpaying.\r\n\r\nThere are a number of reasons why a buyer may gladly pay a price that’s lower than the property’s value. The buyer could, for example, be buying a property from a family member, who is cutting her a favorable deal and pricing lower than the market value. Or it could be a distressed sale where the property is priced lower than it’s worth for a quick sale, or perhaps it’s being sold at auction and the bidding doesn’t reach the expected levels.\r\n\r\nA buyer may also be willing to pay <em>more</em> than a property’s market value in order to secure a particularly attractive investment in a highly competitive market. That’s right, sometimes an investor may have arrived at her own valuation that’s higher than the comparative market value, maybe because she plans on changing the use for a niche high-income strategy (like short-term rentals, for example).\r\n<p class=\"article-tips remember\">If, when you’re valuing a property, you’re using a different valuation method from the person doing the appraisal, you may well arrive at a different value. That’s not necessarily a cause for concern, as long as you’re sure of your own numbers.</p>\r\n\r\n<h2 id=\"tab2\" >The purpose of appraisals</h2>\r\nIn general, appraisals or valuations are used in a number of contexts, from dividing up assets during a divorce to taxation. But for the real estate investor, valuation is used to determine\r\n<ul>\r\n \t<li>How much you can borrow to purchase a property (because appraisals inform mortgage loans)</li>\r\n \t<li>How much you should reasonably expect to pay for a property</li>\r\n \t<li>How much a property could generate in ongoing income (where income is the investment goal)</li>\r\n \t<li>How much you could sell the property for after adding value (where capital growth is the investment goal)</li>\r\n</ul>\r\nValuation is particularly important in real estate because each property is different. As an asset class, property is unique. When you buy two shares of stock on the same day, both shares are identical. But that’s not the case with real estate.\r\n<p class=\"article-tips remember\">Even two properties on the same street can be very different. In fact, even two houses next to each other, even if they’re both identical in size and layout, will vary a great deal in terms of condition, fixtures, and fittings and presentation. Their value will differ accordingly.</p>\r\nValuation is also necessary because most people fund their investments through some sort of financing, like a mortgage. And when you’re borrowing the money to buy a property, the lender will want to know that the property is worth what it’s loaning you. If you default on the loan, forcing the lender to foreclose on the property and sell it, the lender wants to know that there’s enough equity in the property to get its money back. In this way, real estate valuation protects the bank, as well as you.\r\n<h2 id=\"tab3\" >Factors that influence property value</h2>\r\nSo, what kinds of factors impact a property’s value? The key factors are\r\n<ul>\r\n \t<li><strong>The size of the property:</strong> For example, it makes sense that a four-bedroom, three-bathroom house will be worth more than a two-bedroom, one-bathroom house in the same town.</li>\r\n \t<li><strong>The condition of the property:</strong> This is key because it’s how so many investors add value to a property. By renovating and improving a property, even if you’re not doing major structural remodeling, you can increase its value in a relatively short amount of time.</li>\r\n \t<li><strong>How the property is (or can be) used:</strong> For one thing, a commercial property will be valued differently from a residential property. What’s more, various usage restrictions may also impact the value. For example, if zoning restrictions mean it’s impossible to turn a commercial property into a luxury block of apartments, then that restriction may impact how much buyers are willing to pay.</li>\r\n \t<li><strong>The property’s location:</strong> Compare a four-bedroom, three-bathroom house with a smaller house in the same town and it makes sense that the bigger house is worth more. But things get foggier when you bring different locations into the mix. Compare that generous family home in Des Moines, Iowa, with a studio apartment in Midtown Manhattan and the smaller property is likely to be worth more. That’s because different locations are more desirable and valuable than others. Additional local factors like a nearby, highly rated public school or great transportation links can also drive up a property’s value.</li>\r\n \t<li><strong>Supply of property:</strong> A few years ago, there was a lot in the real estate news about Bulgarian apartments. Investors were piling into the country in droves, and new apartment buildings were being thrown up left, right, and center in coastal and ski resort towns. The result? A market that ended up with way more supply (new-build apartments) than demand (actual buyers) and apartment blocks sitting empty and unsold. Compare that with, say, a sought-after coastal village location in Cornwall, in England’s beautiful West Country, where supply of properties is relatively low. Because few properties come onto the market, their value is higher than if there was a deluge of available property.</li>\r\n \t<li><strong>Demand for property:</strong> Think back to the tiny studio apartment in Midtown Manhattan, and you can see how being in a buoyant real estate market, like New York, can impact a property’s value. In a market where there’s a wealth (pardon the pun) of motivated buyers keen to purchase property, combined with plenty of money to buy, demand goes up — and with it, market value.</li>\r\n</ul>\r\n<h2 id=\"tab4\" >Who values real estate?</h2>\r\nSo, who has a hand in deciding a property’s value? Depending on the circumstances, the following people may all be involved in the process at some point:\r\n<ul>\r\n \t<li><strong>Sellers:</strong> Plenty of sellers do their own homework on what their properties may be worth before they put them on the market. And, at the end of the day, it’s the seller who weighs the agent’s recommendation and agrees on the final price.</li>\r\n \t<li><strong>Buyers:</strong> Informed buyers do their own research and analysis, and reach their own conclusions on the fair price for properties.</li>\r\n \t<li><strong>Real estate brokers and agents:</strong> Any good real estate broker or agent knows her market inside and out, and she’ll have a really good handle on the likely value of a property. That said, it’s not uncommon for an agent to quote a higher valuation to get a seller’s business (and a juicier commission), even though this can result in an overpriced property languishing on the market for longer than it needs to. So, when an agent gives you a valuation, do your own homework to determine whether that’s a correct and fair price for your market.</li>\r\n \t<li><strong>Professional appraisers, valuers, or surveyors:</strong> Whenever you’re seeking funding to buy a property, the lender will send a professional appraiser to value the property. (By “professional,” I mean that many countries require appraisers to be qualified and certified.) Depending on the lender and type of funding, you may have some flexibility to appoint the appraiser yourself, or choose from a shortlist of the lender’s appraisers (this is not unusual on a commercial mortgage in the United Kingdom). Many times, though, the lender will simply appoint its own appraiser, and you’ll have no say in the matter. Either way, you’ll ideally have the option of being present at the valuation.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">Be aware that a lender-appointed appraiser may not have a ton of experience in your type of investment; for example, he may specialize in standard residential properties rather than income-generating rentals.</p>","blurb":"","authors":[{"authorId":21941,"name":"Nicholas Wallwork","slug":"nicholas-wallwork","description":" <p><b>Nicholas Wallwork</b> is a leading international real estate market commentator, entrepreneur, business leader, investor, developer, and author. In addition to heading several real estate and investment companies, he wrote <i>Investing in International Real Estate For Dummies</i> and has produced and presented real estate TV shows on the UK&#39;s Sky TV.</br> www.nicholaswallwork.com ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/21941"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Compare price to value in more detail","target":"#tab1"},{"label":"The purpose of appraisals","target":"#tab2"},{"label":"Factors that influence property value","target":"#tab3"},{"label":"Who values real estate?","target":"#tab4"}],"relatedArticles":{"fromBook":[{"articleId":263187,"title":"3 Main Real Estate Valuation Methods","slug":"3-main-real-estate-valuation-methods","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263187"}},{"articleId":263177,"title":"How and Where to Educate Yourself on International Real Estate","slug":"how-and-where-to-educate-yourself-on-international-real-estate","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263177"}},{"articleId":263174,"title":"Real Estate Investment Strategies for a Credit Crunch","slug":"real-estate-investment-strategies-for-a-credit-crunch","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263174"}},{"articleId":263171,"title":"Real Estate Investment Strategies for a Boom Market","slug":"real-estate-investment-strategies-for-a-boom-market","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263171"}},{"articleId":263160,"title":"The Role of Finance in International Real Estate Investments","slug":"the-role-of-finance-in-international-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/263160"}}],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282313,"slug":"investing-in-international-real-estate-for-dummies","isbn":"9781119527527","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"amazon":{"default":"https://www.amazon.com/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/111952752X-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/111952752X/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/investing-in-international-real-estate-for-dummies-cover-9781119527527-203x255.jpg","width":203,"height":255},"title":"Investing in International Real Estate For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<p><b data-author-id=\"21941\">Nicholas Wallwork</b> is a successful entrepreneur, multimillionaire real estate investor, developer, and property and business mentor. He is known across all media channels as a highly respected authority in the real estate investment world and has an extensive and proven track record for delivering successful, high-return investments for his clients and students. Wallwork is dedicated to helping educate investors. Visit www.propertyforum.com/ real-estate-courses for upcoming companion courses to this book. </p>","authors":[{"authorId":21941,"name":"Nicholas Wallwork","slug":"nicholas-wallwork","description":" <p><b>Nicholas Wallwork</b> is a leading international real estate market commentator, entrepreneur, business leader, investor, developer, and author. In addition to heading several real estate and investment companies, he wrote <i>Investing in International Real Estate For Dummies</i> and has produced and presented real estate TV shows on the UK&#39;s Sky TV.</br> www.nicholaswallwork.com ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/21941"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119527527&quot;]}]\" id=\"du-slot-62b36f38cb3f3\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119527527&quot;]}]\" id=\"du-slot-62b36f38cbb47\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"One year","lifeExpectancySetFrom":"2021-05-26T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":263182},{"headers":{"creationTime":"2020-12-17T03:55:59+00:00","modifiedTime":"2021-03-12T22:34:45+00:00","timestamp":"2022-06-22T19:36:11+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"How Home Ownership Can Help You Achieve Financial Goals","strippedTitle":"how home ownership can help you achieve financial goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","canonicalUrl":"","seo":{"metaDescription":"Home ownership can help you accomplish important financial goals: retiring, running a small business, and pursuing higher education.","noIndex":0,"noFollow":0},"content":"Even though your home consumes a lot of dough (mortgage payments, property taxes, insurance, maintenance, and so on) while you own it, it can help you accomplish important financial goals:\r\n<ul>\r\n \t<li><strong>Retiring:</strong> By the time you hit your 50s and 60s, the size of your monthly mortgage payment, relative to your income and assets, should start to look small or nonexistent. Lowered housing costs can help you afford to retire or cut back from full-time work. Some people choose to sell their homes and buy less-costly ones or to rent out the homes and live on some or all of the cash in retirement. Other homeowners enhance their retirement income by taking out a reverse mortgage to tap the equity that they’ve built up in their properties.</li>\r\n \t<li><strong>Pursuing your small-business dreams:</strong> Running your own business can be a source of great satisfaction. Financial barriers, however, prevent many people from pulling the plug on a regular job and taking the entrepreneurial plunge. You may be able to borrow against the equity that you’ve built up in your home to get the cash you need to start your own business. Depending on what type of business you have in mind, you may even be able to run your enterprise from your home.</li>\r\n \t<li><strong>Financing college/higher education:</strong> It may seem like only yesterday that your kids were born, but soon enough they’ll be ready for an expensive four-year undertaking: college. Of course, there are alternatives. Borrowing against the equity in your home is a viable way to help pay for your kids’ higher-education costs.</li>\r\n</ul>\r\nPerhaps you won’t use your home’s equity for retirement, a small business, educational expenses, or other important financial goals. But even if you decide to pass your home on to your children, a charity, or a long-lost relative, it’s still a valuable asset and a worthwhile <a href=\"https://www.dummies.com/personal-finance/investing/investing-for-dummies-cheat-sheet/\">investment</a>.\r\n\r\nThe decision of if and when to buy a home can be complex. Money matters, but so do personal and emotional issues. Buying a home is a big deal — you’re settling down. Can you really see yourself coming home to this same place day after day, year after year? Of course, you can always move, but doing so, especially within just a few years of purchasing the home, can be costly and cumbersome, and now you’ve got a financial obligation to deal with.\r\n<h2 id=\"tab1\" >The pros and cons of ownership</h2>\r\nSome people — particularly enthusiastic salespeople in the real estate business — believe everybody should own a home. You may hear them say things like “Buy a home for the tax breaks” or “Renting is like throwing your money away.”\r\n<p class=\"article-tips remember\">The bulk of home ownership costs — namely, mortgage interest and property taxes — are tax-deductible, subject to limitations. However, these tax breaks are already largely factored into the higher cost of owning a home. So, don’t buy a home just because of the tax breaks.</p>\r\nIf such tax breaks didn’t exist, housing prices would be lower because the effective cost of owning would be so much higher. I wouldn’t be put off by tax reform discussions that mention reducing or even eliminating home-buying tax breaks — the odds of such changes passing are slim to none.\r\n\r\nRenting isn’t necessarily equal to “throwing your money away.” In fact, renting can have a number of benefits, such as the following:\r\n<ul>\r\n \t<li><strong>In some communities, with a given type of property, renting is less costly than buying.</strong> Happy and successful renters I’ve seen include people who pay low rent, perhaps because they’ve made housing sacrifices. If you can sock away 10 percent or more of your earnings while renting, you’re probably well on your way to accomplishing your future financial goals.</li>\r\n \t<li><strong>You can save money and hopefully invest in other financial assets.</strong> Stocks, bonds, and mutual and exchange-traded funds are quite accessible and useful in retirement. Some long-term homeowners, by contrast, have a substantial portion of their wealth tied up in their homes. (<strong><em>Remember:</em></strong> Accessibility is a double-edged sword because it may tempt you as a cash-rich renter to blow the money in the short term.)</li>\r\n \t<li><strong>Renting has potential emotional and psychological rewards.</strong> The main reward is the not-so-inconsequential fact that you have more flexibility to pack up and move on. You may have a lease to fulfill, but you may be able to renegotiate it if you need to move on. As a homeowner, you have a major monthly payment to take care of. To some people, this responsibility feels like a financial ball and chain. After all, you have no guarantee that you can sell your home in a timely fashion or at the price you desire if you want to move.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">Although renting has its benefits, renting has at least one big drawback: exposure to inflation. As the cost of living increases, your landlord can keep increasing your rent (unless you live in a rent-controlled unit). If you’re a homeowner, however, the big monthly expense of the mortgage payment doesn’t increase, assuming that you buy your home with a fixed-rate mortgage. (Your property taxes, homeowners insurance, and maintenance expenses are exposed to inflation, but these expenses are usually much smaller in comparison to your monthly mortgage payment or rent.)</p>\r\nHere’s a quick example to show you how inflation can work against you as a long-term renter. Suppose you’re comparing the costs of owning a home that costs $200,000 to renting a similar property for $1,000 a month. (If you’re in a high-cost urban area and these numbers seem low, please bear with me and focus on the general insights, which you can apply to higher-cost areas.)\r\n\r\nBuying at $200,000 sounds a lot more expensive than renting for $1,000, doesn’t it? But this isn’t an apples-to-apples comparison. You must compare the monthly cost of owning to the monthly cost of renting. You must also factor the tax benefits of home ownership in to your comparison so you compare the after-tax monthly cost of owning versus renting (mortgage interest on up to $750,000 of mortgage debt and property taxes up to $10,000 worth per year when combined with other state and local taxes are tax-deductible). The figure does just that over 30 years.\r\n\r\n[caption id=\"attachment_274971\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-274971\" src=\"https://www.dummies.com/wp-content/uploads/investing-renting-costs.jpg\" alt=\"renting versus buying costs\" width=\"556\" height=\"268\" /> Because of inflation, renting is generally more costly in the long run.[/caption]\r\n\r\nAs you can see in Figure 10-1, although owning costs more in the early years, it should be less expensive in the long run. Renting is costlier in the long term because all your rental expenses increase with inflation. <strong><em>Note:</em></strong> I haven’t factored in the potential change in the value of your home over time. Over long periods of time, home prices tend to appreciate, which makes owning even more attractive.\r\n<p class=\"article-tips tech\">The example in Figure 10-1 assumes that you make a 20 percent down payment and take out a 4 percent fixed-rate mortgage to purchase the property. It also assumes that the rate of inflation of your homeowners’ insurance, property taxes, maintenance, and rent is 3 percent per year. I’ve assumed that the person is in a moderate federal income tax bracket of 24 percent and about half their mortgage interest and property taxes are effectively reducing their tax burden. In the absence of having enough such deductions to be able to itemize deductions, federal income tax filers now qualify for larger so-called standard deductions.</p>\r\n<p class=\"article-tips tech\">If inflation is lower, renting doesn’t necessarily become cheaper in the long term. In the absence of inflation, your rent should escalate less, but your home ownership expenses, which are subject to inflation (property taxes, maintenance, and insurance), should increase less, too. And with low inflation, you can probably refinance your mortgage at a lower interest rate, which reduces your monthly mortgage payments. With low or no inflation, owning can still cost less, but the savings versus renting usually aren’t as dramatic as when inflation is greater.</p>\r\n\r\n<h2 id=\"tab2\" >Recouping transaction costs</h2>\r\nFinancially speaking, I recommend that you wait to buy a home until you can see yourself staying put for a minimum of three years. Ideally, I’d like you to think that you have a good shot of staying in the home for five or more years. Why? Buying and selling a home cost big bucks, and you generally need at least five years of low appreciation to recoup your transaction costs. Some of the expenses you face when buying and selling a home include the following:\r\n<ul>\r\n \t<li><strong>Inspection fees:</strong> You shouldn’t buy a property without thoroughly checking it out, so you’ll incur inspection expenses. Good inspectors can help you identify problems with the plumbing, heating, and electrical systems. They also check out the foundation, roof, and so on. They can even tell you whether termites are living in the house. Property inspections typically range from a few hundred dollars up to $1,000+ for larger homes.</li>\r\n \t<li><strong>Loan costs:</strong> The costs of getting a mortgage include items such as the <em>points</em> (upfront interest that can run 1 to 2 percent of the loan amount), application and credit report fees, and appraisal fees.</li>\r\n \t<li><strong>Title insurance:</strong> When you buy a home, you and your lender need to protect yourselves against the chance — albeit small — that the property seller doesn’t actually legally own the home you’re buying. That’s where title insurance comes in — it protects you financially from unscrupulous sellers. Title insurance costs vary by area; 0.5 percent of the purchase price of the property is about average.</li>\r\n \t<li><strong>Moving costs:</strong> You can transport all of your furniture, clothing, and other personal belongings yourself, but your time is worth something, and your moving skills may be limited. Besides, do you want to end up in a hospital emergency room after being pinned at the bottom of a staircase by a runaway couch? Moving costs vary wildly, but you can count on spending hundreds to thousands of dollars. (You can get a ballpark idea of moving costs from a number of online calculators.)</li>\r\n \t<li><strong>Real estate agents’ commissions:</strong> A commission of 5 to 7 percent of the purchase price of most homes is paid to the real estate salespeople and the companies they work for. Higher priced homes generally qualify for lower commission rates.</li>\r\n</ul>\r\n<p class=\"article-tips remember\">On top of all these transaction costs of buying and then selling a home, you’ll also face maintenance expenses — for example, fixing leaky pipes and painting. To cover all the transaction and maintenance costs of home ownership, the value of your home needs to appreciate about 15 percent over the years that you own it for you to be as well off financially as if you had continued renting. Fifteen percent! If you need or want to move elsewhere in a few years, counting on that kind of appreciation in those few years is risky. If you happen to buy just before a sharp rise in housing prices, you may get this much appreciation in a short time. But you can’t count on this upswing — you’re more likely to lose money on such a short-term deal.</p>\r\nSome people invest in real estate even when they don’t expect to live in the home for long, and they may consider turning their home into a rental if they move within a few years. Doing so can work well financially in the long haul, but don’t underestimate the responsibilities that come with rental property.","description":"Even though your home consumes a lot of dough (mortgage payments, property taxes, insurance, maintenance, and so on) while you own it, it can help you accomplish important financial goals:\r\n<ul>\r\n \t<li><strong>Retiring:</strong> By the time you hit your 50s and 60s, the size of your monthly mortgage payment, relative to your income and assets, should start to look small or nonexistent. Lowered housing costs can help you afford to retire or cut back from full-time work. Some people choose to sell their homes and buy less-costly ones or to rent out the homes and live on some or all of the cash in retirement. Other homeowners enhance their retirement income by taking out a reverse mortgage to tap the equity that they’ve built up in their properties.</li>\r\n \t<li><strong>Pursuing your small-business dreams:</strong> Running your own business can be a source of great satisfaction. Financial barriers, however, prevent many people from pulling the plug on a regular job and taking the entrepreneurial plunge. You may be able to borrow against the equity that you’ve built up in your home to get the cash you need to start your own business. Depending on what type of business you have in mind, you may even be able to run your enterprise from your home.</li>\r\n \t<li><strong>Financing college/higher education:</strong> It may seem like only yesterday that your kids were born, but soon enough they’ll be ready for an expensive four-year undertaking: college. Of course, there are alternatives. Borrowing against the equity in your home is a viable way to help pay for your kids’ higher-education costs.</li>\r\n</ul>\r\nPerhaps you won’t use your home’s equity for retirement, a small business, educational expenses, or other important financial goals. But even if you decide to pass your home on to your children, a charity, or a long-lost relative, it’s still a valuable asset and a worthwhile <a href=\"https://www.dummies.com/personal-finance/investing/investing-for-dummies-cheat-sheet/\">investment</a>.\r\n\r\nThe decision of if and when to buy a home can be complex. Money matters, but so do personal and emotional issues. Buying a home is a big deal — you’re settling down. Can you really see yourself coming home to this same place day after day, year after year? Of course, you can always move, but doing so, especially within just a few years of purchasing the home, can be costly and cumbersome, and now you’ve got a financial obligation to deal with.\r\n<h2 id=\"tab1\" >The pros and cons of ownership</h2>\r\nSome people — particularly enthusiastic salespeople in the real estate business — believe everybody should own a home. You may hear them say things like “Buy a home for the tax breaks” or “Renting is like throwing your money away.”\r\n<p class=\"article-tips remember\">The bulk of home ownership costs — namely, mortgage interest and property taxes — are tax-deductible, subject to limitations. However, these tax breaks are already largely factored into the higher cost of owning a home. So, don’t buy a home just because of the tax breaks.</p>\r\nIf such tax breaks didn’t exist, housing prices would be lower because the effective cost of owning would be so much higher. I wouldn’t be put off by tax reform discussions that mention reducing or even eliminating home-buying tax breaks — the odds of such changes passing are slim to none.\r\n\r\nRenting isn’t necessarily equal to “throwing your money away.” In fact, renting can have a number of benefits, such as the following:\r\n<ul>\r\n \t<li><strong>In some communities, with a given type of property, renting is less costly than buying.</strong> Happy and successful renters I’ve seen include people who pay low rent, perhaps because they’ve made housing sacrifices. If you can sock away 10 percent or more of your earnings while renting, you’re probably well on your way to accomplishing your future financial goals.</li>\r\n \t<li><strong>You can save money and hopefully invest in other financial assets.</strong> Stocks, bonds, and mutual and exchange-traded funds are quite accessible and useful in retirement. Some long-term homeowners, by contrast, have a substantial portion of their wealth tied up in their homes. (<strong><em>Remember:</em></strong> Accessibility is a double-edged sword because it may tempt you as a cash-rich renter to blow the money in the short term.)</li>\r\n \t<li><strong>Renting has potential emotional and psychological rewards.</strong> The main reward is the not-so-inconsequential fact that you have more flexibility to pack up and move on. You may have a lease to fulfill, but you may be able to renegotiate it if you need to move on. As a homeowner, you have a major monthly payment to take care of. To some people, this responsibility feels like a financial ball and chain. After all, you have no guarantee that you can sell your home in a timely fashion or at the price you desire if you want to move.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">Although renting has its benefits, renting has at least one big drawback: exposure to inflation. As the cost of living increases, your landlord can keep increasing your rent (unless you live in a rent-controlled unit). If you’re a homeowner, however, the big monthly expense of the mortgage payment doesn’t increase, assuming that you buy your home with a fixed-rate mortgage. (Your property taxes, homeowners insurance, and maintenance expenses are exposed to inflation, but these expenses are usually much smaller in comparison to your monthly mortgage payment or rent.)</p>\r\nHere’s a quick example to show you how inflation can work against you as a long-term renter. Suppose you’re comparing the costs of owning a home that costs $200,000 to renting a similar property for $1,000 a month. (If you’re in a high-cost urban area and these numbers seem low, please bear with me and focus on the general insights, which you can apply to higher-cost areas.)\r\n\r\nBuying at $200,000 sounds a lot more expensive than renting for $1,000, doesn’t it? But this isn’t an apples-to-apples comparison. You must compare the monthly cost of owning to the monthly cost of renting. You must also factor the tax benefits of home ownership in to your comparison so you compare the after-tax monthly cost of owning versus renting (mortgage interest on up to $750,000 of mortgage debt and property taxes up to $10,000 worth per year when combined with other state and local taxes are tax-deductible). The figure does just that over 30 years.\r\n\r\n[caption id=\"attachment_274971\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-274971\" src=\"https://www.dummies.com/wp-content/uploads/investing-renting-costs.jpg\" alt=\"renting versus buying costs\" width=\"556\" height=\"268\" /> Because of inflation, renting is generally more costly in the long run.[/caption]\r\n\r\nAs you can see in Figure 10-1, although owning costs more in the early years, it should be less expensive in the long run. Renting is costlier in the long term because all your rental expenses increase with inflation. <strong><em>Note:</em></strong> I haven’t factored in the potential change in the value of your home over time. Over long periods of time, home prices tend to appreciate, which makes owning even more attractive.\r\n<p class=\"article-tips tech\">The example in Figure 10-1 assumes that you make a 20 percent down payment and take out a 4 percent fixed-rate mortgage to purchase the property. It also assumes that the rate of inflation of your homeowners’ insurance, property taxes, maintenance, and rent is 3 percent per year. I’ve assumed that the person is in a moderate federal income tax bracket of 24 percent and about half their mortgage interest and property taxes are effectively reducing their tax burden. In the absence of having enough such deductions to be able to itemize deductions, federal income tax filers now qualify for larger so-called standard deductions.</p>\r\n<p class=\"article-tips tech\">If inflation is lower, renting doesn’t necessarily become cheaper in the long term. In the absence of inflation, your rent should escalate less, but your home ownership expenses, which are subject to inflation (property taxes, maintenance, and insurance), should increase less, too. And with low inflation, you can probably refinance your mortgage at a lower interest rate, which reduces your monthly mortgage payments. With low or no inflation, owning can still cost less, but the savings versus renting usually aren’t as dramatic as when inflation is greater.</p>\r\n\r\n<h2 id=\"tab2\" >Recouping transaction costs</h2>\r\nFinancially speaking, I recommend that you wait to buy a home until you can see yourself staying put for a minimum of three years. Ideally, I’d like you to think that you have a good shot of staying in the home for five or more years. Why? Buying and selling a home cost big bucks, and you generally need at least five years of low appreciation to recoup your transaction costs. Some of the expenses you face when buying and selling a home include the following:\r\n<ul>\r\n \t<li><strong>Inspection fees:</strong> You shouldn’t buy a property without thoroughly checking it out, so you’ll incur inspection expenses. Good inspectors can help you identify problems with the plumbing, heating, and electrical systems. They also check out the foundation, roof, and so on. They can even tell you whether termites are living in the house. Property inspections typically range from a few hundred dollars up to $1,000+ for larger homes.</li>\r\n \t<li><strong>Loan costs:</strong> The costs of getting a mortgage include items such as the <em>points</em> (upfront interest that can run 1 to 2 percent of the loan amount), application and credit report fees, and appraisal fees.</li>\r\n \t<li><strong>Title insurance:</strong> When you buy a home, you and your lender need to protect yourselves against the chance — albeit small — that the property seller doesn’t actually legally own the home you’re buying. That’s where title insurance comes in — it protects you financially from unscrupulous sellers. Title insurance costs vary by area; 0.5 percent of the purchase price of the property is about average.</li>\r\n \t<li><strong>Moving costs:</strong> You can transport all of your furniture, clothing, and other personal belongings yourself, but your time is worth something, and your moving skills may be limited. Besides, do you want to end up in a hospital emergency room after being pinned at the bottom of a staircase by a runaway couch? Moving costs vary wildly, but you can count on spending hundreds to thousands of dollars. (You can get a ballpark idea of moving costs from a number of online calculators.)</li>\r\n \t<li><strong>Real estate agents’ commissions:</strong> A commission of 5 to 7 percent of the purchase price of most homes is paid to the real estate salespeople and the companies they work for. Higher priced homes generally qualify for lower commission rates.</li>\r\n</ul>\r\n<p class=\"article-tips remember\">On top of all these transaction costs of buying and then selling a home, you’ll also face maintenance expenses — for example, fixing leaky pipes and painting. To cover all the transaction and maintenance costs of home ownership, the value of your home needs to appreciate about 15 percent over the years that you own it for you to be as well off financially as if you had continued renting. Fifteen percent! If you need or want to move elsewhere in a few years, counting on that kind of appreciation in those few years is risky. If you happen to buy just before a sharp rise in housing prices, you may get this much appreciation in a short time. But you can’t count on this upswing — you’re more likely to lose money on such a short-term deal.</p>\r\nSome people invest in real estate even when they don’t expect to live in the home for long, and they may consider turning their home into a rental if they move within a few years. Doing so can work well financially in the long haul, but don’t underestimate the responsibilities that come with rental property.","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"The pros and cons of ownership","target":"#tab1"},{"label":"Recouping transaction costs","target":"#tab2"}],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}},{"articleId":266678,"title":"10 Steps to Real Estate Investing Success","slug":"10-steps-to-real-estate-investing-success","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266678"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f2b1fa74\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" 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Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"Simple, Profitable Real Estate Investments","strippedTitle":"simple, profitable real estate investments","slug":"simple-profitable-real-estate-investments","canonicalUrl":"","seo":{"metaDescription":"Explore a couple of the simpler yet still profitable methods of investing in real estate, such as home ownership and real estate investment trusts.","noIndex":0,"noFollow":0},"content":"Investing in rental real estate that you’re responsible for can be a lot of work. Think about it this way: With rental properties, you have all the headaches of maintaining a property, including finding and dealing with tenants, without the benefits of living in and enjoying the property.\r\n<p class=\"article-tips tip\">Unless you’re extraordinarily interested in and motivated to own investment real estate, start with and perhaps limit yourself to a couple of the much simpler yet still profitable methods discussed here.</p>\r\n\r\n\r\n[caption id=\"attachment_274966\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-274966\" src=\"https://www.dummies.com/wp-content/uploads/investing-real-estate.jpg\" alt=\"real estate investment\" width=\"556\" height=\"371\" /> © AlexMX / Shutterstock.com[/caption]\r\n<h2 id=\"tab1\" >Find a place to call home</h2>\r\nDuring your adult life, you need to put a roof over your head. You may be able to sponge off your folks or some other relative or friend for a number of years to cut costs and save money. If you’re content with this arrangement, you can minimize your housing costs and save more for a down payment and possibly toward other goals. Go for it, if your friend or relative will!\r\n\r\nBut what if neither you nor your loved ones are up for the challenge of cohabitating? For the long term, because you need a place to live, why not own real estate instead of renting it? Real estate is the only investment that you can live in or rent to produce income. You can’t live in a stock, bond, or mutual fund! Unless you expect to move within the next few years or live in an area where owning costs much more than renting, buying a place probably makes good long-term financial sense. In the long term, owning usually costs less than renting, and it allows you to build equity in an asset.\r\n<h2 id=\"tab2\" >Think carefully before converting your home into a rental</h2>\r\nIf you move into another home, turning your current home into a rental property may make sense. After all, it saves you the time and cost of finding a separate rental property.\r\n\r\nUnfortunately, many people hold on to their current home for the wrong reasons when they buy another. Homeowners often make this mistake when they must sell their homes in a depressed market (such as the one that existed in many areas in the late 2000s). Nobody likes to sell their home for less than they paid for it, so some owners hold on to their homes until prices recover.\r\n\r\nIf you plan to move and want to keep your current home as a long-term investment property, you can. But turning your home into a short-term rental is usually a bad move for the following reasons:\r\n<ul>\r\n \t<li>You may not want the responsibilities of a landlord, yet you force yourself into the landlord business when you convert your home into a rental.</li>\r\n \t<li>If the home eventually does rebound in value, you owe tax on the profit if your property is a rental when you sell it and you don’t buy another rental property. You can purchase another rental property through a 1031 exchange to defer paying taxes on your profit.</li>\r\n</ul>\r\n<h2 id=\"tab3\" >Real estate investment trusts</h2>\r\n<em>Real estate investment trusts</em> (REITs) are entities that generally invest in different types of property, such as shopping centers, apartments, and other rental buildings. For a fee, REIT managers identify and negotiate the purchase of properties that they believe are good investments, and then they manage these properties, including all tenant relations. Thus, REITs are a good way to invest in real estate if you don’t want the hassles and headaches that come with directly owning and managing rental property.\r\n\r\nSurprisingly, most books and blogs that focus on real estate <a href=\"https://www.dummies.com/personal-finance/investing/investing-for-dummies-cheat-sheet/\">investing</a> neglect REITs. Why? I’ve come to the conclusion that they overlook these entities for the following reasons:\r\n<ul>\r\n \t<li><strong>If you invest in real estate through REITs, you don’t need to read a long, complicated book on real estate investment or keep coming back to a blog.</strong> Therefore, books often focus on more complicated direct real estate investments (where you buy and own property yourself).</li>\r\n \t<li><strong>Real estate brokers write many of these books.</strong> Not surprisingly, the real estate investment strategies touted in these books include and advocate the use of such brokers. You can buy REITs without real estate brokers. Blogs and websites aren’t much better as they are often run by folks selling something else like a high-priced seminar or other direct investment “opportunity.”</li>\r\n \t<li><strong>A certain snobbishness prevails among people who consider themselves to be “serious” real estate investors.</strong> These folks thumb their noses at the benefit of REITs in an investment portfolio. One real estate writer/investor went so far as to say that REITs aren’t “real” real estate investments.</li>\r\n</ul>\r\nPlease. No, you can’t drive your friends by a REIT to show it off. But those who put their egos aside when making real estate investments are happy that they considered REITs, and have enjoyed annualized gains similar to stocks in general over the decades.\r\n\r\nYou can research and purchase shares in individual REITs, which trade as securities on the major stock exchanges. An even better approach is to buy a mutual fund or exchange-traded fund that invests in a diversified mixture of REITs.\r\n\r\nIn addition to providing you with a diversified, low-hassle real estate investment, REITs offer an additional advantage that traditional rental real estate doesn’t: You can easily invest in REITs through a retirement account (for example, an IRA). As with traditional real estate investments, you can even buy REITs, mutual fund REITs, and exchange-traded fund REITs with borrowed money. You can buy with 50 percent down, called <em>buying on margin,</em> when you purchase such investments through a non-retirement brokerage account.","description":"Investing in rental real estate that you’re responsible for can be a lot of work. Think about it this way: With rental properties, you have all the headaches of maintaining a property, including finding and dealing with tenants, without the benefits of living in and enjoying the property.\r\n<p class=\"article-tips tip\">Unless you’re extraordinarily interested in and motivated to own investment real estate, start with and perhaps limit yourself to a couple of the much simpler yet still profitable methods discussed here.</p>\r\n\r\n\r\n[caption id=\"attachment_274966\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-274966\" src=\"https://www.dummies.com/wp-content/uploads/investing-real-estate.jpg\" alt=\"real estate investment\" width=\"556\" height=\"371\" /> © AlexMX / Shutterstock.com[/caption]\r\n<h2 id=\"tab1\" >Find a place to call home</h2>\r\nDuring your adult life, you need to put a roof over your head. You may be able to sponge off your folks or some other relative or friend for a number of years to cut costs and save money. If you’re content with this arrangement, you can minimize your housing costs and save more for a down payment and possibly toward other goals. Go for it, if your friend or relative will!\r\n\r\nBut what if neither you nor your loved ones are up for the challenge of cohabitating? For the long term, because you need a place to live, why not own real estate instead of renting it? Real estate is the only investment that you can live in or rent to produce income. You can’t live in a stock, bond, or mutual fund! Unless you expect to move within the next few years or live in an area where owning costs much more than renting, buying a place probably makes good long-term financial sense. In the long term, owning usually costs less than renting, and it allows you to build equity in an asset.\r\n<h2 id=\"tab2\" >Think carefully before converting your home into a rental</h2>\r\nIf you move into another home, turning your current home into a rental property may make sense. After all, it saves you the time and cost of finding a separate rental property.\r\n\r\nUnfortunately, many people hold on to their current home for the wrong reasons when they buy another. Homeowners often make this mistake when they must sell their homes in a depressed market (such as the one that existed in many areas in the late 2000s). Nobody likes to sell their home for less than they paid for it, so some owners hold on to their homes until prices recover.\r\n\r\nIf you plan to move and want to keep your current home as a long-term investment property, you can. But turning your home into a short-term rental is usually a bad move for the following reasons:\r\n<ul>\r\n \t<li>You may not want the responsibilities of a landlord, yet you force yourself into the landlord business when you convert your home into a rental.</li>\r\n \t<li>If the home eventually does rebound in value, you owe tax on the profit if your property is a rental when you sell it and you don’t buy another rental property. You can purchase another rental property through a 1031 exchange to defer paying taxes on your profit.</li>\r\n</ul>\r\n<h2 id=\"tab3\" >Real estate investment trusts</h2>\r\n<em>Real estate investment trusts</em> (REITs) are entities that generally invest in different types of property, such as shopping centers, apartments, and other rental buildings. For a fee, REIT managers identify and negotiate the purchase of properties that they believe are good investments, and then they manage these properties, including all tenant relations. Thus, REITs are a good way to invest in real estate if you don’t want the hassles and headaches that come with directly owning and managing rental property.\r\n\r\nSurprisingly, most books and blogs that focus on real estate <a href=\"https://www.dummies.com/personal-finance/investing/investing-for-dummies-cheat-sheet/\">investing</a> neglect REITs. Why? I’ve come to the conclusion that they overlook these entities for the following reasons:\r\n<ul>\r\n \t<li><strong>If you invest in real estate through REITs, you don’t need to read a long, complicated book on real estate investment or keep coming back to a blog.</strong> Therefore, books often focus on more complicated direct real estate investments (where you buy and own property yourself).</li>\r\n \t<li><strong>Real estate brokers write many of these books.</strong> Not surprisingly, the real estate investment strategies touted in these books include and advocate the use of such brokers. You can buy REITs without real estate brokers. Blogs and websites aren’t much better as they are often run by folks selling something else like a high-priced seminar or other direct investment “opportunity.”</li>\r\n \t<li><strong>A certain snobbishness prevails among people who consider themselves to be “serious” real estate investors.</strong> These folks thumb their noses at the benefit of REITs in an investment portfolio. One real estate writer/investor went so far as to say that REITs aren’t “real” real estate investments.</li>\r\n</ul>\r\nPlease. No, you can’t drive your friends by a REIT to show it off. But those who put their egos aside when making real estate investments are happy that they considered REITs, and have enjoyed annualized gains similar to stocks in general over the decades.\r\n\r\nYou can research and purchase shares in individual REITs, which trade as securities on the major stock exchanges. An even better approach is to buy a mutual fund or exchange-traded fund that invests in a diversified mixture of REITs.\r\n\r\nIn addition to providing you with a diversified, low-hassle real estate investment, REITs offer an additional advantage that traditional rental real estate doesn’t: You can easily invest in REITs through a retirement account (for example, an IRA). As with traditional real estate investments, you can even buy REITs, mutual fund REITs, and exchange-traded fund REITs with borrowed money. You can buy with 50 percent down, called <em>buying on margin,</em> when you purchase such investments through a non-retirement brokerage account.","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Find a place to call home","target":"#tab1"},{"label":"Think carefully before converting your home into a rental","target":"#tab2"},{"label":"Real estate investment trusts","target":"#tab3"}],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}},{"articleId":266678,"title":"10 Steps to Real Estate Investing Success","slug":"10-steps-to-real-estate-investing-success","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266678"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f2b1833e\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f2b18b03\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"Two years","lifeExpectancySetFrom":null,"dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":274965},{"headers":{"creationTime":"2016-03-27T16:47:33+00:00","modifiedTime":"2021-03-09T12:04:16+00:00","timestamp":"2022-06-22T19:36:09+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"Real Estate Investing For Dummies Cheat Sheet","strippedTitle":"real estate investing for dummies cheat sheet","slug":"real-estate-investing-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Explore these tried and proven real-estate investing strategies that real people, just like you, use to build wealth—from Dummies.com.","noIndex":0,"noFollow":0},"content":"<i>Real Estate Investing For Dummies</i> covers tried and proven real estate investing strategies that real people, just like you, use to build wealth. Investing in real estate isn't rocket science but does require doing your homework. So if you were expecting to turn into an overnight multimillionaire then you're not in the right place — but if you're searching for a solid long-term investing strategy and the tools to get you there then <i>Real Estate Investing For Dummies</i> is the right book for your needs.\r\n\r\n[caption id=\"attachment_266207\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-266207\" src=\"https://www.dummies.com/wp-content/uploads/real-estate-investing.jpg\" alt=\"illustration of real estate investment\" width=\"556\" height=\"371\" /> ©Andrey_Popov/Shutterstock.com[/caption]\r\n\r\nFollowing are some of the key principles that we cover more in-depth in the book:\r\n<h5>Copyright © 2019 Eric Tyson and Robert S. Griswold. All rights reserved.</h5>","description":"<i>Real Estate Investing For Dummies</i> covers tried and proven real estate investing strategies that real people, just like you, use to build wealth. Investing in real estate isn't rocket science but does require doing your homework. So if you were expecting to turn into an overnight multimillionaire then you're not in the right place — but if you're searching for a solid long-term investing strategy and the tools to get you there then <i>Real Estate Investing For Dummies</i> is the right book for your needs.\r\n\r\n[caption id=\"attachment_266207\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-266207\" src=\"https://www.dummies.com/wp-content/uploads/real-estate-investing.jpg\" alt=\"illustration of real estate investment\" width=\"556\" height=\"371\" /> ©Andrey_Popov/Shutterstock.com[/caption]\r\n\r\nFollowing are some of the key principles that we cover more in-depth in the book:\r\n<h5>Copyright © 2019 Eric Tyson and Robert S. Griswold. All rights reserved.</h5>","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}},{"authorId":9293,"name":"Robert S. Griswold","slug":"robert-s-griswold","description":"Robert S. Griswold, MBA, is a successful real estate investor and property manager with a large portfolio of residential and commercial rental properties. He is the real estate expert for NBC San Diego, the lead columnist for the nationally syndicated columns Rental Roundtable and Rental Forum and coauthor of Real Estate Investing For Dummies.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9293"}}],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}},{"articleId":266678,"title":"10 Steps to Real Estate Investing Success","slug":"10-steps-to-real-estate-investing-success","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266678"}},{"articleId":266673,"title":"10 Ways to Increase a Property’s Value","slug":"10-ways-to-increase-a-propertys-value","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266673"}},{"articleId":266668,"title":"Risk Management Plan for Real Estate Investments","slug":"risk-management-plan-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266668"}}],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate 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Estate Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"8975\">Eric Tyson</b> </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> <p><b>Eric Tyson</b> is a five&#45;time bestselling author, real estate investor, and syndicated columnist who gives people the tools to better manage their personal finances and investments. <b><b data-author-id=\"34808\">Robert S. Griswold</b>,</b> author, teacher, and a successful real estate investor, is an active, hands&#45;on property manager with a large portfolio of residential and commercial rental properties.</p>","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}},{"authorId":34808,"name":"Robert S. Griswold","slug":"robert-s.-griswold","description":" <p><b>Eric Tyson</b> is a five&#45;time bestselling author, real estate investor, and syndicated columnist who gives people the tools to better manage their personal finances and investments. <b>Robert S. Griswold,</b> author, teacher, and a successful real estate investor, is an active, hands&#45;on property manager with a large portfolio of residential and commercial rental properties. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34808"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119601760&quot;]}]\" id=\"du-slot-62b36f293a9e3\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119601760&quot;]}]\" id=\"du-slot-62b36f293b120\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":145527,"title":"Eric and Robert's Principles for Real-Estate Investing Success","slug":"eric-and-roberts-principles-for-real-estate-investing-success","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145527"}}],"content":[{"title":"Eric and Robert's Principles for Real-Estate Investing Success","thumb":null,"image":null,"content":"<p>Copyright © 2019 Eric Tyson and Robert S. Griswold. All rights reserved.</p>\n<ul>\n<li><strong>Real estate is a proven wealth-building vehicle.</strong> Investing in rental properties can generate current income and significant tax benefits as well as build equity from appreciation over the years and decades.</li>\n<li><strong>Although many people can succeed investing in real estate, <a href=\"https://dummies-wp-content.dummies.com/personal-finance/real-estate/home-buying/how-to-exempt-ordinary-wear-and-tear-on-your-rental-property/\">rental property investing</a> isn&#8217;t for everyone.</strong> Consider your investment preferences and personal temperament before buying property. Do you have the time to devote to real estate investing? Are you comfortable troubleshooting problems or hiring a property manager?</li>\n<li><strong>Make sure you&#8217;re financially fit before investing in rental properties.</strong> Pay particular attention to your monthly budget and make sure that you have adequate insurance coverage. Most successful real estate investors build their real estate investment portfolio through saving money and then gradually buying properties over the years.</li>\n<li><strong>Don&#8217;t underestimate the importance of establishing good credit.</strong> The best returns on real estate rely upon the use of credit to obtain the leverage of using OPM (other people&#8217;s money).</li>\n<li><strong>Your first (and often one of the best) real estate investment is buying a home to live in.</strong> Real estate is the only investment that we know of that you can live in or rent to produce income. You can also derive large tax-free profits when you sell your principal residence at a higher price than you paid for it.</li>\n<li><strong>Focus on residential properties in the beginning.</strong> Residential property is an attractive investment and is easier to understand, purchase, and manage than most other types of property. If you&#8217;re a homeowner, you already have experience locating, purchasing, and maintaining residential property.</li>\n<li><strong>Among residential property options, our top recommendations are small apartment buildings and single-family homes.</strong> Attached housing makes more sense for investors who don&#8217;t want to deal with building maintenance and security issues. Attached-housing prices tend to perform best in developed urban environments.</li>\n<li><strong>Have your real estate team in place before you begin your serious property searching.</strong> Line up a real estate agent, loan officer, tax advisor, lawyer, and so on early because the real estate investor with the best resources can identify the properties to ignore and those worthy of careful consideration. Move quickly — the speed at which you can close a transaction is an advantage in any type of market.</li>\n<li><strong>Look for properties in the path of progress.</strong> Areas where new development or redevelopment is heading are where you want to be. The best real estate investment properties are ones that are well located and physically sound but cosmetically challenged and poorly managed.</li>\n<li><strong>You don&#8217;t get rich trying to find no-money-down real estate investment deals.</strong> Don&#8217;t believe infomercials hucksters. Don&#8217;t expect to buy top-notch rental properties that way.</li>\n<li><strong>Making at least a 20 to 25 percent down payment provides access to the best financing terms.</strong> You can make smaller down payments — even as low as 10 percent or less — but you often pay a much higher interest rate, loan fees, and private mortgage insurance. Leverage, or the use of the lenders&#8217; money to cover the majority of your acquisition costs, can boost your rates of return. But too much leverage can be dangerous if the rental market turns and your debt expenses are high.</li>\n<li><strong>As the size and complexity of the deal increases, financing options become less attractive.</strong> The financing options for larger apartment buildings (five or more units), commercial, retail, industrial, and raw land generally require more money down and/or higher interest rates and loan fees. But more advanced real estate investors can enjoy higher overall returns plus the benefits of easier management and stability from long-term tenants.</li>\n<li><strong>For low entry costs, consider real estate investment trusts (REITs) and lease options.</strong> You can buy these exchange–traded securities (which can also be bought through REIT focused mutual funds) for a thousand dollars or less. With lease options, you begin by renting a property you may be interested in purchasing later, and a portion of your monthly rent goes towards the future purchase. If you can find a seller willing to provide financing, you can keep your down payment to a minimum.</li>\n<li><strong>We prefer the adage of &#8220;Location, location, value.&#8221;</strong> It clearly emphasizes location but also the importance of finding good value for your investment dollar. Owning real estate in up and coming areas with new development or renovated properties enhances finding and keeping good tenants and leads to greater returns. Properties in great locations with extensive deferred maintenance, especially aesthetic issues that can be inexpensively addressed are another great opportunity.</li>\n<li><strong>Make real estate investments close by.</strong> Buy property within two hours away by your favorite mode of transportation. Venture further only when you really know another real estate market and regularly find yourself there for other reasons or you&#8217;ve found an excellent property manager.</li>\n<li><strong>Any decision about where to invest starts with an evaluation of the overall region&#8217;s economic trends.</strong> If the area isn&#8217;t economically sound, then the likelihood for successful real estate investments are diminished.</li>\n<li><strong>You&#8217;re purchasing a future income stream or cash flow when you buy an investment property.</strong> What you pay for a property and the cash flow it generates makes a significant difference in the success of your investment. The key is identifying which properties sellers have under-priced.</li>\n<li><strong>Don&#8217;t rely on the seller&#8217;s numbers when evaluating a property&#8217;s potential.</strong> Speak directly with the seller to determine the history of the property and their motivation for selling. But, don&#8217;t rely on historic operating results offered by the seller or broker. Develop your own numbers through evaluating the property with a team of qualified professionals who are specialists in the physical and fiscal management of real estate.</li>\n<li><strong>The buy-and-flip real estate investment strategy can work, but it also has a downside.</strong> Buying and flipping can be a way to make quick money in real estate if you time your investments correctly in a rapidly rising real estate market. However, flipping can cause your profits to be taxed as ordinary income and you could lose during a market downturn.</li>\n<li><strong><em>Bottom line:</em> Real estate professionals, and you, should value a property based on the projected Net Operating Income (NOI).</strong> Project the NOI preferably for next few years. Projecting the NOI is time consuming and requires a lot of experience, especially if you plan property changes to increase income and/or reduce expenses.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Explore","lifeExpectancy":"Six months","lifeExpectancySetFrom":null,"dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207572},{"headers":{"creationTime":"2019-12-14T00:06:13+00:00","modifiedTime":"2020-03-06T05:45:30+00:00","timestamp":"2022-06-22T19:35:50+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Investing","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34288"},"slug":"investing","categoryId":34288},{"name":"Real Estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"},"slug":"real-estate","categoryId":34299}],"title":"Risk Management Plan for Real Estate Investments","strippedTitle":"risk management plan for real estate investments","slug":"risk-management-plan-for-real-estate-investments","canonicalUrl":"","seo":{"metaDescription":"Real estate investment property owners need a plan to minimize risks because rental property owners are sued more than any other type of business entity.","noIndex":0,"noFollow":0},"content":"Many people get into the world of rental real estate without knowing how much risk they’re exposed to just by owning real estate. You may read stories in the newspaper about lawsuits against deep-pocket defendants without much personal concern, but it’s a reality check when you’re suddenly considered to be the one with those deep pockets.\r\n\r\n[caption id=\"attachment_266669\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-266669\" src=\"https://www.dummies.com/wp-content/uploads/real-estate-investing-risk.jpg\" alt=\"real estate risk management\" width=\"556\" height=\"312\" /> ©bleakstar/Shuttersstock.com[/caption]\r\n<p class=\"article-tips remember\">Real estate investment property owners need a plan to minimize risks because they’re frequent targets of those who suffer a personal injury or whose property is damaged. But those aren’t the only lawsuits targeting rental property owners. Many studies have shown that real estate rental property owners are sued more than any other single type of business entity.</p>\r\nIn a recent but troubling trend, some legal advisors are encouraging residents to file lawsuits claiming that their rental unit is not habitable. Some of the more unscrupulous tenant rights attorneys and organizations even discourage their clients from first contacting the rental property owner for needed repairs and maintenance, instead preferring to file complaints with governmental agencies and then use such reports to bolster their claims when seeking damages such as rent abatement and personal injury claims. The primary targets seem to be self-managed properties or management companies that do not have a strong track record of excellent maintenance and detailed documentation.\r\n<p class=\"article-tips tip\">Robert has served as an expert witness in over 2,000 litigation matters throughout the country involving all types of real estate for over 25 years. Lawsuits filed against property owners and management companies seem to be recession proof. But, in addition to proper maintenance and repairs and excellent customer service for tenants, he does have one specific recommendation that will inoculate you from many of these less legitimate lawsuits — eliminate or cap the “prevailing party” attorney fee clause in your lease or rental agreement. Property owners like this clause as they envision collecting their legal fees and costs when evicting tenants for nonpayment. But tenant rights attorneys see this as an opportunity for them to get even a minor judgment against a property owner or their management company and then be able to collect huge legal fees and costs. So, take Robert’s advice and simply eliminate the attorney fee clause or at least cap the prevailing party to not exceed $1,000 or $2,000. You will have removed a tempting incentive for aggressive legal sharks looking for an opportunity to turn a “small claims” case into a major lawsuit with the potential of six-figure legal fees and costs.</p>\r\nYou can take steps to reduce and control your risk. Consider the following suggestions as preventive actions to minimize the potential of being named in a lawsuit:\r\n<ul>\r\n \t<li><strong>Regularly inspect the property as part of a thorough maintenance program.</strong> One of the easiest ways to minimize the potential of being named in a lawsuit is to routinely inspect your property and correct any noted deficiencies, such as health or safety problems. Be sure to comply with all advance notice of entry requirements and access limitation laws before going into the rental unit or going onto the tenants’ exclusive exterior areas. Make and retain copies of your inspections and document that all items were promptly and professionally addressed. If possible, see if your tenant will sign off on the completion of any work done so you will have proof that at least at that time the tenant was satisfied with the condition of his rental unit.</li>\r\n \t<li><strong>Listen to and address tenant complaints.</strong> Be open and responsive to feedback from your tenants and others expressing concerns and consistently require tenant maintenance and repair requests to be in writing, even if you write it down for them and have them sign. Always obtain written permission to enter the rental unit and carefully document any issues where the tenants make complaints, but then make access to address the problems difficult or delayed. A track record of quick response to complaints, with the proper documentation (paper-trail) to prove your timeliness, is the best defense if you find yourself defending a claim or lawsuit alleging uninhabitable conditions, an injury, or property damage due to your negligence.</li>\r\n \t<li><strong>Transfer the risk to others.</strong> Transferring risk from the owner and property manager to the vendor or supplier is sound policy for managing and minimizing risk. You can do this contractually by only using licensed and qualified contractors and suppliers who provide their own insurance coverage. Require that they provide written evidence that they have proper insurance coverage in place naming you individually and the legal entity that actually holds title to your investment property as an additional insured prior to performing work or providing materials. If you use a management company to handle the property management for you, make sure that they require insurance declaration forms from all vendors and suppliers documenting $1 million minimum coverage limits prior to doing any work or even making deliveries to your property. Have a file for hard copies of the insurance declarations with a tickler system to make sure that this important insurance coverage does not get canceled or lapse due to nonrenewal or nonpayment.</li>\r\n \t<li><strong>Remove certain risks or never allow them in the first place.</strong> For example, many owners and managers of residential properties have removed diving boards and pool slides. Commercial property owners have restricted access to the roofs of their buildings with emergency door hardware (which may sound an alarm but still allows roof access in case of an emergency).</li>\r\n</ul>\r\n<p class=\"article-tips remember\">Although you can minimize your risks by taking some of these steps, you can’t eliminate all risks completely, and that’s why you need proper insurance coverage. Insurance is a vital element in a <a href=\"https://www.dummies.com/careers/project-management/how-to-prepare-a-risk-management-plan/\">risk-management program</a>.</p>","description":"Many people get into the world of rental real estate without knowing how much risk they’re exposed to just by owning real estate. You may read stories in the newspaper about lawsuits against deep-pocket defendants without much personal concern, but it’s a reality check when you’re suddenly considered to be the one with those deep pockets.\r\n\r\n[caption id=\"attachment_266669\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-266669\" src=\"https://www.dummies.com/wp-content/uploads/real-estate-investing-risk.jpg\" alt=\"real estate risk management\" width=\"556\" height=\"312\" /> ©bleakstar/Shuttersstock.com[/caption]\r\n<p class=\"article-tips remember\">Real estate investment property owners need a plan to minimize risks because they’re frequent targets of those who suffer a personal injury or whose property is damaged. But those aren’t the only lawsuits targeting rental property owners. Many studies have shown that real estate rental property owners are sued more than any other single type of business entity.</p>\r\nIn a recent but troubling trend, some legal advisors are encouraging residents to file lawsuits claiming that their rental unit is not habitable. Some of the more unscrupulous tenant rights attorneys and organizations even discourage their clients from first contacting the rental property owner for needed repairs and maintenance, instead preferring to file complaints with governmental agencies and then use such reports to bolster their claims when seeking damages such as rent abatement and personal injury claims. The primary targets seem to be self-managed properties or management companies that do not have a strong track record of excellent maintenance and detailed documentation.\r\n<p class=\"article-tips tip\">Robert has served as an expert witness in over 2,000 litigation matters throughout the country involving all types of real estate for over 25 years. Lawsuits filed against property owners and management companies seem to be recession proof. But, in addition to proper maintenance and repairs and excellent customer service for tenants, he does have one specific recommendation that will inoculate you from many of these less legitimate lawsuits — eliminate or cap the “prevailing party” attorney fee clause in your lease or rental agreement. Property owners like this clause as they envision collecting their legal fees and costs when evicting tenants for nonpayment. But tenant rights attorneys see this as an opportunity for them to get even a minor judgment against a property owner or their management company and then be able to collect huge legal fees and costs. So, take Robert’s advice and simply eliminate the attorney fee clause or at least cap the prevailing party to not exceed $1,000 or $2,000. You will have removed a tempting incentive for aggressive legal sharks looking for an opportunity to turn a “small claims” case into a major lawsuit with the potential of six-figure legal fees and costs.</p>\r\nYou can take steps to reduce and control your risk. Consider the following suggestions as preventive actions to minimize the potential of being named in a lawsuit:\r\n<ul>\r\n \t<li><strong>Regularly inspect the property as part of a thorough maintenance program.</strong> One of the easiest ways to minimize the potential of being named in a lawsuit is to routinely inspect your property and correct any noted deficiencies, such as health or safety problems. Be sure to comply with all advance notice of entry requirements and access limitation laws before going into the rental unit or going onto the tenants’ exclusive exterior areas. Make and retain copies of your inspections and document that all items were promptly and professionally addressed. If possible, see if your tenant will sign off on the completion of any work done so you will have proof that at least at that time the tenant was satisfied with the condition of his rental unit.</li>\r\n \t<li><strong>Listen to and address tenant complaints.</strong> Be open and responsive to feedback from your tenants and others expressing concerns and consistently require tenant maintenance and repair requests to be in writing, even if you write it down for them and have them sign. Always obtain written permission to enter the rental unit and carefully document any issues where the tenants make complaints, but then make access to address the problems difficult or delayed. A track record of quick response to complaints, with the proper documentation (paper-trail) to prove your timeliness, is the best defense if you find yourself defending a claim or lawsuit alleging uninhabitable conditions, an injury, or property damage due to your negligence.</li>\r\n \t<li><strong>Transfer the risk to others.</strong> Transferring risk from the owner and property manager to the vendor or supplier is sound policy for managing and minimizing risk. You can do this contractually by only using licensed and qualified contractors and suppliers who provide their own insurance coverage. Require that they provide written evidence that they have proper insurance coverage in place naming you individually and the legal entity that actually holds title to your investment property as an additional insured prior to performing work or providing materials. If you use a management company to handle the property management for you, make sure that they require insurance declaration forms from all vendors and suppliers documenting $1 million minimum coverage limits prior to doing any work or even making deliveries to your property. Have a file for hard copies of the insurance declarations with a tickler system to make sure that this important insurance coverage does not get canceled or lapse due to nonrenewal or nonpayment.</li>\r\n \t<li><strong>Remove certain risks or never allow them in the first place.</strong> For example, many owners and managers of residential properties have removed diving boards and pool slides. Commercial property owners have restricted access to the roofs of their buildings with emergency door hardware (which may sound an alarm but still allows roof access in case of an emergency).</li>\r\n</ul>\r\n<p class=\"article-tips remember\">Although you can minimize your risks by taking some of these steps, you can’t eliminate all risks completely, and that’s why you need proper insurance coverage. Insurance is a vital element in a <a href=\"https://www.dummies.com/careers/project-management/how-to-prepare-a-risk-management-plan/\">risk-management program</a>.</p>","blurb":"","authors":[],"primaryCategoryTaxonomy":{"categoryId":34299,"title":"Real Estate","slug":"real-estate","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34299"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}},{"articleId":266678,"title":"10 Steps to Real Estate Investing Success","slug":"10-steps-to-real-estate-investing-success","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266678"}},{"articleId":266673,"title":"10 Ways to Increase a Property’s Value","slug":"10-ways-to-increase-a-propertys-value","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266673"}},{"articleId":207572,"title":"Real Estate Investing For Dummies Cheat Sheet","slug":"real-estate-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207572"}}],"fromCategory":[{"articleId":291208,"title":"Foreclosure Investing For Dummies Cheat Sheet","slug":"foreclosure-investing-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/291208"}},{"articleId":274970,"title":"How Home Ownership Can Help You Achieve Financial Goals","slug":"how-home-ownership-can-help-you-achieve-financial-goals","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274970"}},{"articleId":274965,"title":"Simple, Profitable Real Estate Investments","slug":"simple-profitable-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/274965"}},{"articleId":266690,"title":"Public and Private Real Estate Investment Trusts","slug":"public-and-private-real-estate-investment-trusts","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266690"}},{"articleId":266683,"title":"How to Qualify Property Inspectors for Real Estate Investments","slug":"how-to-qualify-property-inspectors-for-real-estate-investments","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/266683"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282530,"slug":"real-estate-investing-for-dummies-4th-edition","isbn":"9781119601760","categoryList":["business-careers-money","personal-finance","investing","real-estate"],"amazon":{"default":"https://www.amazon.com/gp/product/1119601762/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119601762/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119601762-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119601762/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119601762/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/real-estate-investing-for-dummies-4th-edition-cover-9781119601760-203x255.jpg","width":203,"height":255},"title":"Real Estate Investing For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"8975\">Eric Tyson</b> </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> <p><b>Eric Tyson</b> is a five&#45;time bestselling author, real estate investor, and syndicated columnist who gives people the tools to better manage their personal finances and investments. <b><b data-author-id=\"34808\">Robert S. Griswold</b>,</b> author, teacher, and a successful real estate investor, is an active, hands&#45;on property manager with a large portfolio of residential and commercial rental properties.</p>","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson </b>is a veteran Dummies author of numerous bestselling books in the investing and personal finance space.</p> <p><b>Paul Mladjenovic</B> is a Certified Financial Planner and the bestselling author of <i>Stock Investing For Dummies.</i> <p><B>Kiana Danial</B> is an investment consultant and trainer and the author of <i>Cryptocurrency Investing For Dummies.</i> <p><b>Russell Wild </B>is the author or coauthor of nearly two dozen books, including <i>ETFs For Dummies.</i> <p><b>Matt Krantz </b>is a nationally known financial journalist and the author of <i>Online Investing For Dummies. </i> <p><b>Robert Griswold</b> is a successful real estate investor and property manager and the co-author of <i>Real Estate Investing For Dummies.</i> <p><b>Steven Gormley</B> is a celebrated expert in the legal marijuana sector and author of <i>Investing in Cannabis For Dummies.</i> <p><b>Brendan Bradley</b> is a financial market professional and the author of <i>ESG Investing For Dummies.</i> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}},{"authorId":34808,"name":"Robert S. Griswold","slug":"robert-s.-griswold","description":" <p><b>Eric Tyson</b> is a five&#45;time bestselling author, real estate investor, and syndicated columnist who gives people the tools to better manage their personal finances and investments. <b>Robert S. Griswold,</b> author, teacher, and a successful real estate investor, is an active, hands&#45;on property manager with a large portfolio of residential and commercial rental properties. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34808"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;investing&quot;,&quot;real-estate&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119601760&quot;]}]\" id=\"du-slot-62b36f160cc2e\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = 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Real Estate Articles

Find a fixer-upper, a dream home, a place to retire, a vacation getaway, or any other piece of real estate you desire. We'll show you how to shop smart, understand equity, and protect your assets.

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Real Estate Real Estate Investing For Canadians For Dummies Cheat Sheet

Cheat Sheet / Updated 03-24-2022

Interested in adding Canadian real estate to your investment portfolio? Give yourself a head-start by brushing up on your real estate terminology, discovering how to identify profitable properties, and knowing where to turn for reliable help online.

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Real Estate Commercial Real Estate Investing For Dummies Cheat Sheet

Cheat Sheet / Updated 03-10-2022

Use this handy Cheat Sheet to learn how to sound like a pro real estate investor (even if you’re just getting started.) Then keep it on hand to make sure you’re staying on top of every commercial property you acquire!

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Real Estate Addressing 10 Common Real Estate Investing Misconceptions

Article / Updated 03-07-2022

Buying a home is most people's first foray into the world of real estate. However, real estate can also be a good place to invest your money and see a profit. More people invest in the stock market than invest in real estate (beyond the home in which they live). Some reasons for this are due to misconceptions. These misconceptions also cause some investors to see less-than-stellar returns on their real estate investments. Here are common real estate misconceptions followed by why they are wrong: You need to be wealthy. Although it's true that you need money to play the game of investing in real estate (for a down payment), you don't need millions or even hundreds of thousands of dollars to get started. A five-figure ($10,000+) savings balance provides a point of entry into good investment properties. You need to be a high-income earner. So often in the news we hear about the Donald Trumps and other big-income earners as the ones making big bucks investing in real estate. But there's no reason you need a million-dollar-plus income to invest successfully in property. You don't even need a $100,000+ income. Many folks begin investing in real estate while earning modest wages or salaries. You need to have connections and know the "right" people. You should certainly have a team of competent real estate professionals and contractors and suppliers, but anyone can assemble such a squad. You need to be lucky to make big money. A little bit of luck is always welcome of course, but the key to making money with real estate investing is to do your homework. Find the right property in the right location, acquire that property at a fair price, and successfully manage all of your properties well over time. It doesn't matter who you rent your property to as long as you keep the property occupied. Real estate investors often overlook or downplay the importance of tenant selection. Properly preparing the property to attract the most qualified prospective tenants and then targeting your advertising to that target market are the first two steps to increasing your odds of finding a qualified tenant. You want to look for tenants who will stay for the long term, treat your property with care and respect, and essentially make your mortgage payments for you and build up your equity. It's not worth investing in real estate unless you buy can a large property. False! Most people who invest in real estate get started with small, less costly properties. Bigger and more expensive properties typically come many years down the road. The collapse in real estate prices before and during the 2008 financial crisis shows real estate isn't a good investment. Real estate, like stocks and other ownership-type investments, goes through cycles. But if you do your homework and buy solid properties at fair prices and manage them well over time, you should earn solid returns. Also, keep in mind that values of different types of properties in various locations don't all move in lockstep. The best way to make money in real estate is to buy and flip properties, especially if you can renovate them. Holding a property for a relatively short period of time ensures that your transaction costs of buying and then selling will consume a large portion or even all of your profits. Also, your profits may end up being taxed at higher tax rates for shorter holding periods. Once you own several properties, you can enjoy sitting back while the profits roll in. Wrong! Managing rental properties and doing it well takes time and resourcefulness. There are no shortcuts, especially if you want to avoid unpleasant surprises and make the most of your properties. You should always buy small properties to add to your holdings and continue to manage these multiple rentals. Acquiring small properties to begin your real estate investing career certainly makes sense, and you can do quite well over many years. But at some point, you should seriously consider selling some of the smaller properties and consolidating your real estate holdings into larger properties. Take the equity you have built up over time in the small properties and use it to purchase medium to larger properties. By selling several smaller properties and buying a larger one, you can take advantage of the economies of scale that a larger property offers. With larger properties, either you can manage them or you can hire professional management if you want to avoid the day-to-day headaches often associated with tenants, maintenance, and upkeep.

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Real Estate Foreclosure Investing For Dummies Cheat Sheet

Cheat Sheet / Updated 03-01-2022

Foreclosure investing is complicated and risky. I’ve seen individual investors lose tens of thousands of dollars at a single auction simply because they had no idea what they were doing. You’re smart to study up on the process before putting any money on the line. This Cheat Sheet will get you up to speed in a hurry on foreclosure investing and help you steer clear of some of the major pitfalls. However, I strongly encourage you to study up on the foreclosure process in the location (state and county) where you choose to invest, and hire an attorney with foreclosure experience to cover your back, at least for your first few investment properties.

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Real Estate What is Passive Income?

Article / Updated 09-20-2021

Passive income is the key to building real wealth. Think of passive income as another name for yield (the money you make on an investment). What makes it passive is that, after it’s up and running, the investment requires minimal input from you for the income, or yield, to keep coming in, month after month. In other words, you invest some of your time and money upfront, and you get money back in return on a regular basis. Your money starts working for you, not the other way around. Sounds good, right? When people think of making money through real estate, their first thought is often capital growth (for example, buying a property for $200,000 and selling it six months later for $270,000). That’s a solid approach to making money, and capital growth projects certainly can make up part of any portfolio. If you’re going to treat your property portfolio as a business, you need to think about income, as well as capital growth. Investing for income tends to be less risky and more reliable than capital growth — because money in the bank this month, and next month, and the month after that is safer than relying on future growth. That’s not to say you won’t achieve capital growth alongside income. If you own a collection of rental and serviced accommodation properties, for instance, those properties will likely grow in value over time. In this way, capital growth is like a cherry on top of a delicious income sundae. Generating income from real estate is so exciting because it’s relatively hands-off compared to, say, working 9 to 5 for a paycheck. In that way, it can be described as passive income. The great Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.” So, if you like the idea of making money while you slumber (and, honestly, who doesn’t?), then the passive income mindset is for you. It’s important to note that passive income isn’t just about making more money (although that is, of course, a big attraction). It’s not about greed. It’s about rethinking the fundamental nature of work and developing the means to live life your way. For you, it may mean putting in a few hours in the morning and having the rest of the day off, or having a four-day weekend, or never wearing a suit again! In short, passive income gives you more freedom — to do whatever you want. Passive income isn’t a get-rich-quick scheme. It takes time to build up a good level of passive income. So, if you’re looking to quit your job and devote yourself to real estate full time, it may be a while before you’re comfortable giving up the security of your existing income. Examples of passive income Anything that generates money and isn’t directly tied to your effort or output (in the way of a regular job) is considered passive income. So, investing in the stock market can be considered passive income. So, too, can real estate. What’s great about real estate investing is that there are so many exciting sub-strategies for generating a regular income, including the following: Property development Rent-to-rent Houses in multiple occupations Student and vacation rentals If you think passive income ventures like these require a lot of upfront capital, think again. Rent-to-rent, for instance, requires nothing more than the first month’s rent and deposit to get started — and sometimes less than that! In this way, property can offer a fairly low-capital route to passive income. This is why I believe real estate is probably the most achievable path to passive income for the average person on the street. It can create serious wealth, too, if done right. Pros and cons of passive income Here are the pros and cons of passive income, as this author sees them. On the plus side passive income gives you: More time and freedom: Assuming you build up to a level of passive income where you no longer have to work 9 to 5, you have much more choice in how you live your life and more time for the things you love. Better work-life balance: You can be there to take the kids to school and pick them up at the end of the day, and manage your real estate investments when it works for you. The ability to indulge your passion — and your talents: Concentrating on passive income has allowed me to invest in projects that genuinely interest and excite me. You can spend time on the parts of the business you find most interesting or are the best use of your time. The rest you can outsource to people who are better qualified. Passive income gives you the means to reach your full potential. What could be more satisfying than that? On the downside, with passive income: You have to take a longer-term view. Passive income isn’t about getting rich overnight. It’s about rethinking the way you work and earn money for the long haul. There’s a cost to being more hands-off. As your portfolio grows, you’ll probably have to outsource some of your workload to other people and/or invest in technology to take care of certain tasks for you. This means sacrificing some of your income to cover these costs. For me, the additional cost is well worth it because it frees me up to focus on new opportunities and profit-enhancing activities. You can’t get away with putting in zero effort. “Low” or “minimal” effort, sure. But not zero effort. You need to invest some time in your investments, both in terms of establishing your new projects and checking in on them regularly. When you’ve got a property up and running nicely, and you’re generating a regular income from it, don’t make the same mistake as a lot of investors and ignore the property. If things go wrong because you’ve stepped off the gas, you’ll have to devote lots of time and energy to get things back on track. To keep your investments on track, you’re far better off spending a little time often than spending a lot of time only occasionally.

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Real Estate What Is Real Estate Value and Valuation

Article / Updated 05-26-2021

Value is easy, right? It’s the price you pay for a property? Well, it’s not quite that simple — price and value aren’t always the same thing. Real estate appraisal or property valuation is the process of determining what a property is actually worth. This may or may not be the same as its price. Appraisers go under different names depending on where you are in the world; real estate appraiser, property valuer, and chartered surveyor are the most common names. The terms appraiser, valuer, and surveyor are used interchangeably. Compare price to value in more detail A property’s price (how much the property costs to purchase) can be very different from its value (what the property is worth). For example, a property may actually be worth in the region of $300,000 but the seller may have an inflated idea of its value and insist on putting it on the market at $350,000 — or he may have been guided to set the price high by an especially greedy agent who wants a higher commission. A buyer with a firm grip on valuation will understand that $350,000 isn’t a fair market comparison for that property, and refuse to cough up. But an unsuspecting and inexperienced investor could fall into the trap and end up overpaying. There are a number of reasons why a buyer may gladly pay a price that’s lower than the property’s value. The buyer could, for example, be buying a property from a family member, who is cutting her a favorable deal and pricing lower than the market value. Or it could be a distressed sale where the property is priced lower than it’s worth for a quick sale, or perhaps it’s being sold at auction and the bidding doesn’t reach the expected levels. A buyer may also be willing to pay more than a property’s market value in order to secure a particularly attractive investment in a highly competitive market. That’s right, sometimes an investor may have arrived at her own valuation that’s higher than the comparative market value, maybe because she plans on changing the use for a niche high-income strategy (like short-term rentals, for example). If, when you’re valuing a property, you’re using a different valuation method from the person doing the appraisal, you may well arrive at a different value. That’s not necessarily a cause for concern, as long as you’re sure of your own numbers. The purpose of appraisals In general, appraisals or valuations are used in a number of contexts, from dividing up assets during a divorce to taxation. But for the real estate investor, valuation is used to determine How much you can borrow to purchase a property (because appraisals inform mortgage loans) How much you should reasonably expect to pay for a property How much a property could generate in ongoing income (where income is the investment goal) How much you could sell the property for after adding value (where capital growth is the investment goal) Valuation is particularly important in real estate because each property is different. As an asset class, property is unique. When you buy two shares of stock on the same day, both shares are identical. But that’s not the case with real estate. Even two properties on the same street can be very different. In fact, even two houses next to each other, even if they’re both identical in size and layout, will vary a great deal in terms of condition, fixtures, and fittings and presentation. Their value will differ accordingly. Valuation is also necessary because most people fund their investments through some sort of financing, like a mortgage. And when you’re borrowing the money to buy a property, the lender will want to know that the property is worth what it’s loaning you. If you default on the loan, forcing the lender to foreclose on the property and sell it, the lender wants to know that there’s enough equity in the property to get its money back. In this way, real estate valuation protects the bank, as well as you. Factors that influence property value So, what kinds of factors impact a property’s value? The key factors are The size of the property: For example, it makes sense that a four-bedroom, three-bathroom house will be worth more than a two-bedroom, one-bathroom house in the same town. The condition of the property: This is key because it’s how so many investors add value to a property. By renovating and improving a property, even if you’re not doing major structural remodeling, you can increase its value in a relatively short amount of time. How the property is (or can be) used: For one thing, a commercial property will be valued differently from a residential property. What’s more, various usage restrictions may also impact the value. For example, if zoning restrictions mean it’s impossible to turn a commercial property into a luxury block of apartments, then that restriction may impact how much buyers are willing to pay. The property’s location: Compare a four-bedroom, three-bathroom house with a smaller house in the same town and it makes sense that the bigger house is worth more. But things get foggier when you bring different locations into the mix. Compare that generous family home in Des Moines, Iowa, with a studio apartment in Midtown Manhattan and the smaller property is likely to be worth more. That’s because different locations are more desirable and valuable than others. Additional local factors like a nearby, highly rated public school or great transportation links can also drive up a property’s value. Supply of property: A few years ago, there was a lot in the real estate news about Bulgarian apartments. Investors were piling into the country in droves, and new apartment buildings were being thrown up left, right, and center in coastal and ski resort towns. The result? A market that ended up with way more supply (new-build apartments) than demand (actual buyers) and apartment blocks sitting empty and unsold. Compare that with, say, a sought-after coastal village location in Cornwall, in England’s beautiful West Country, where supply of properties is relatively low. Because few properties come onto the market, their value is higher than if there was a deluge of available property. Demand for property: Think back to the tiny studio apartment in Midtown Manhattan, and you can see how being in a buoyant real estate market, like New York, can impact a property’s value. In a market where there’s a wealth (pardon the pun) of motivated buyers keen to purchase property, combined with plenty of money to buy, demand goes up — and with it, market value. Who values real estate? So, who has a hand in deciding a property’s value? Depending on the circumstances, the following people may all be involved in the process at some point: Sellers: Plenty of sellers do their own homework on what their properties may be worth before they put them on the market. And, at the end of the day, it’s the seller who weighs the agent’s recommendation and agrees on the final price. Buyers: Informed buyers do their own research and analysis, and reach their own conclusions on the fair price for properties. Real estate brokers and agents: Any good real estate broker or agent knows her market inside and out, and she’ll have a really good handle on the likely value of a property. That said, it’s not uncommon for an agent to quote a higher valuation to get a seller’s business (and a juicier commission), even though this can result in an overpriced property languishing on the market for longer than it needs to. So, when an agent gives you a valuation, do your own homework to determine whether that’s a correct and fair price for your market. Professional appraisers, valuers, or surveyors: Whenever you’re seeking funding to buy a property, the lender will send a professional appraiser to value the property. (By “professional,” I mean that many countries require appraisers to be qualified and certified.) Depending on the lender and type of funding, you may have some flexibility to appoint the appraiser yourself, or choose from a shortlist of the lender’s appraisers (this is not unusual on a commercial mortgage in the United Kingdom). Many times, though, the lender will simply appoint its own appraiser, and you’ll have no say in the matter. Either way, you’ll ideally have the option of being present at the valuation. Be aware that a lender-appointed appraiser may not have a ton of experience in your type of investment; for example, he may specialize in standard residential properties rather than income-generating rentals.

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Real Estate How Home Ownership Can Help You Achieve Financial Goals

Article / Updated 03-12-2021

Even though your home consumes a lot of dough (mortgage payments, property taxes, insurance, maintenance, and so on) while you own it, it can help you accomplish important financial goals: Retiring: By the time you hit your 50s and 60s, the size of your monthly mortgage payment, relative to your income and assets, should start to look small or nonexistent. Lowered housing costs can help you afford to retire or cut back from full-time work. Some people choose to sell their homes and buy less-costly ones or to rent out the homes and live on some or all of the cash in retirement. Other homeowners enhance their retirement income by taking out a reverse mortgage to tap the equity that they’ve built up in their properties. Pursuing your small-business dreams: Running your own business can be a source of great satisfaction. Financial barriers, however, prevent many people from pulling the plug on a regular job and taking the entrepreneurial plunge. You may be able to borrow against the equity that you’ve built up in your home to get the cash you need to start your own business. Depending on what type of business you have in mind, you may even be able to run your enterprise from your home. Financing college/higher education: It may seem like only yesterday that your kids were born, but soon enough they’ll be ready for an expensive four-year undertaking: college. Of course, there are alternatives. Borrowing against the equity in your home is a viable way to help pay for your kids’ higher-education costs. Perhaps you won’t use your home’s equity for retirement, a small business, educational expenses, or other important financial goals. But even if you decide to pass your home on to your children, a charity, or a long-lost relative, it’s still a valuable asset and a worthwhile investment. The decision of if and when to buy a home can be complex. Money matters, but so do personal and emotional issues. Buying a home is a big deal — you’re settling down. Can you really see yourself coming home to this same place day after day, year after year? Of course, you can always move, but doing so, especially within just a few years of purchasing the home, can be costly and cumbersome, and now you’ve got a financial obligation to deal with. The pros and cons of ownership Some people — particularly enthusiastic salespeople in the real estate business — believe everybody should own a home. You may hear them say things like “Buy a home for the tax breaks” or “Renting is like throwing your money away.” The bulk of home ownership costs — namely, mortgage interest and property taxes — are tax-deductible, subject to limitations. However, these tax breaks are already largely factored into the higher cost of owning a home. So, don’t buy a home just because of the tax breaks. If such tax breaks didn’t exist, housing prices would be lower because the effective cost of owning would be so much higher. I wouldn’t be put off by tax reform discussions that mention reducing or even eliminating home-buying tax breaks — the odds of such changes passing are slim to none. Renting isn’t necessarily equal to “throwing your money away.” In fact, renting can have a number of benefits, such as the following: In some communities, with a given type of property, renting is less costly than buying. Happy and successful renters I’ve seen include people who pay low rent, perhaps because they’ve made housing sacrifices. If you can sock away 10 percent or more of your earnings while renting, you’re probably well on your way to accomplishing your future financial goals. You can save money and hopefully invest in other financial assets. Stocks, bonds, and mutual and exchange-traded funds are quite accessible and useful in retirement. Some long-term homeowners, by contrast, have a substantial portion of their wealth tied up in their homes. (Remember: Accessibility is a double-edged sword because it may tempt you as a cash-rich renter to blow the money in the short term.) Renting has potential emotional and psychological rewards. The main reward is the not-so-inconsequential fact that you have more flexibility to pack up and move on. You may have a lease to fulfill, but you may be able to renegotiate it if you need to move on. As a homeowner, you have a major monthly payment to take care of. To some people, this responsibility feels like a financial ball and chain. After all, you have no guarantee that you can sell your home in a timely fashion or at the price you desire if you want to move. Although renting has its benefits, renting has at least one big drawback: exposure to inflation. As the cost of living increases, your landlord can keep increasing your rent (unless you live in a rent-controlled unit). If you’re a homeowner, however, the big monthly expense of the mortgage payment doesn’t increase, assuming that you buy your home with a fixed-rate mortgage. (Your property taxes, homeowners insurance, and maintenance expenses are exposed to inflation, but these expenses are usually much smaller in comparison to your monthly mortgage payment or rent.) Here’s a quick example to show you how inflation can work against you as a long-term renter. Suppose you’re comparing the costs of owning a home that costs $200,000 to renting a similar property for $1,000 a month. (If you’re in a high-cost urban area and these numbers seem low, please bear with me and focus on the general insights, which you can apply to higher-cost areas.) Buying at $200,000 sounds a lot more expensive than renting for $1,000, doesn’t it? But this isn’t an apples-to-apples comparison. You must compare the monthly cost of owning to the monthly cost of renting. You must also factor the tax benefits of home ownership in to your comparison so you compare the after-tax monthly cost of owning versus renting (mortgage interest on up to $750,000 of mortgage debt and property taxes up to $10,000 worth per year when combined with other state and local taxes are tax-deductible). The figure does just that over 30 years. As you can see in Figure 10-1, although owning costs more in the early years, it should be less expensive in the long run. Renting is costlier in the long term because all your rental expenses increase with inflation. Note: I haven’t factored in the potential change in the value of your home over time. Over long periods of time, home prices tend to appreciate, which makes owning even more attractive. The example in Figure 10-1 assumes that you make a 20 percent down payment and take out a 4 percent fixed-rate mortgage to purchase the property. It also assumes that the rate of inflation of your homeowners’ insurance, property taxes, maintenance, and rent is 3 percent per year. I’ve assumed that the person is in a moderate federal income tax bracket of 24 percent and about half their mortgage interest and property taxes are effectively reducing their tax burden. In the absence of having enough such deductions to be able to itemize deductions, federal income tax filers now qualify for larger so-called standard deductions. If inflation is lower, renting doesn’t necessarily become cheaper in the long term. In the absence of inflation, your rent should escalate less, but your home ownership expenses, which are subject to inflation (property taxes, maintenance, and insurance), should increase less, too. And with low inflation, you can probably refinance your mortgage at a lower interest rate, which reduces your monthly mortgage payments. With low or no inflation, owning can still cost less, but the savings versus renting usually aren’t as dramatic as when inflation is greater. Recouping transaction costs Financially speaking, I recommend that you wait to buy a home until you can see yourself staying put for a minimum of three years. Ideally, I’d like you to think that you have a good shot of staying in the home for five or more years. Why? Buying and selling a home cost big bucks, and you generally need at least five years of low appreciation to recoup your transaction costs. Some of the expenses you face when buying and selling a home include the following: Inspection fees: You shouldn’t buy a property without thoroughly checking it out, so you’ll incur inspection expenses. Good inspectors can help you identify problems with the plumbing, heating, and electrical systems. They also check out the foundation, roof, and so on. They can even tell you whether termites are living in the house. Property inspections typically range from a few hundred dollars up to $1,000+ for larger homes. Loan costs: The costs of getting a mortgage include items such as the points (upfront interest that can run 1 to 2 percent of the loan amount), application and credit report fees, and appraisal fees. Title insurance: When you buy a home, you and your lender need to protect yourselves against the chance — albeit small — that the property seller doesn’t actually legally own the home you’re buying. That’s where title insurance comes in — it protects you financially from unscrupulous sellers. Title insurance costs vary by area; 0.5 percent of the purchase price of the property is about average. Moving costs: You can transport all of your furniture, clothing, and other personal belongings yourself, but your time is worth something, and your moving skills may be limited. Besides, do you want to end up in a hospital emergency room after being pinned at the bottom of a staircase by a runaway couch? Moving costs vary wildly, but you can count on spending hundreds to thousands of dollars. (You can get a ballpark idea of moving costs from a number of online calculators.) Real estate agents’ commissions: A commission of 5 to 7 percent of the purchase price of most homes is paid to the real estate salespeople and the companies they work for. Higher priced homes generally qualify for lower commission rates. On top of all these transaction costs of buying and then selling a home, you’ll also face maintenance expenses — for example, fixing leaky pipes and painting. To cover all the transaction and maintenance costs of home ownership, the value of your home needs to appreciate about 15 percent over the years that you own it for you to be as well off financially as if you had continued renting. Fifteen percent! If you need or want to move elsewhere in a few years, counting on that kind of appreciation in those few years is risky. If you happen to buy just before a sharp rise in housing prices, you may get this much appreciation in a short time. But you can’t count on this upswing — you’re more likely to lose money on such a short-term deal. Some people invest in real estate even when they don’t expect to live in the home for long, and they may consider turning their home into a rental if they move within a few years. Doing so can work well financially in the long haul, but don’t underestimate the responsibilities that come with rental property.

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Real Estate Simple, Profitable Real Estate Investments

Article / Updated 03-12-2021

Investing in rental real estate that you’re responsible for can be a lot of work. Think about it this way: With rental properties, you have all the headaches of maintaining a property, including finding and dealing with tenants, without the benefits of living in and enjoying the property. Unless you’re extraordinarily interested in and motivated to own investment real estate, start with and perhaps limit yourself to a couple of the much simpler yet still profitable methods discussed here. Find a place to call home During your adult life, you need to put a roof over your head. You may be able to sponge off your folks or some other relative or friend for a number of years to cut costs and save money. If you’re content with this arrangement, you can minimize your housing costs and save more for a down payment and possibly toward other goals. Go for it, if your friend or relative will! But what if neither you nor your loved ones are up for the challenge of cohabitating? For the long term, because you need a place to live, why not own real estate instead of renting it? Real estate is the only investment that you can live in or rent to produce income. You can’t live in a stock, bond, or mutual fund! Unless you expect to move within the next few years or live in an area where owning costs much more than renting, buying a place probably makes good long-term financial sense. In the long term, owning usually costs less than renting, and it allows you to build equity in an asset. Think carefully before converting your home into a rental If you move into another home, turning your current home into a rental property may make sense. After all, it saves you the time and cost of finding a separate rental property. Unfortunately, many people hold on to their current home for the wrong reasons when they buy another. Homeowners often make this mistake when they must sell their homes in a depressed market (such as the one that existed in many areas in the late 2000s). Nobody likes to sell their home for less than they paid for it, so some owners hold on to their homes until prices recover. If you plan to move and want to keep your current home as a long-term investment property, you can. But turning your home into a short-term rental is usually a bad move for the following reasons: You may not want the responsibilities of a landlord, yet you force yourself into the landlord business when you convert your home into a rental. If the home eventually does rebound in value, you owe tax on the profit if your property is a rental when you sell it and you don’t buy another rental property. You can purchase another rental property through a 1031 exchange to defer paying taxes on your profit. Real estate investment trusts Real estate investment trusts (REITs) are entities that generally invest in different types of property, such as shopping centers, apartments, and other rental buildings. For a fee, REIT managers identify and negotiate the purchase of properties that they believe are good investments, and then they manage these properties, including all tenant relations. Thus, REITs are a good way to invest in real estate if you don’t want the hassles and headaches that come with directly owning and managing rental property. Surprisingly, most books and blogs that focus on real estate investing neglect REITs. Why? I’ve come to the conclusion that they overlook these entities for the following reasons: If you invest in real estate through REITs, you don’t need to read a long, complicated book on real estate investment or keep coming back to a blog. Therefore, books often focus on more complicated direct real estate investments (where you buy and own property yourself). Real estate brokers write many of these books. Not surprisingly, the real estate investment strategies touted in these books include and advocate the use of such brokers. You can buy REITs without real estate brokers. Blogs and websites aren’t much better as they are often run by folks selling something else like a high-priced seminar or other direct investment “opportunity.” A certain snobbishness prevails among people who consider themselves to be “serious” real estate investors. These folks thumb their noses at the benefit of REITs in an investment portfolio. One real estate writer/investor went so far as to say that REITs aren’t “real” real estate investments. Please. No, you can’t drive your friends by a REIT to show it off. But those who put their egos aside when making real estate investments are happy that they considered REITs, and have enjoyed annualized gains similar to stocks in general over the decades. You can research and purchase shares in individual REITs, which trade as securities on the major stock exchanges. An even better approach is to buy a mutual fund or exchange-traded fund that invests in a diversified mixture of REITs. In addition to providing you with a diversified, low-hassle real estate investment, REITs offer an additional advantage that traditional rental real estate doesn’t: You can easily invest in REITs through a retirement account (for example, an IRA). As with traditional real estate investments, you can even buy REITs, mutual fund REITs, and exchange-traded fund REITs with borrowed money. You can buy with 50 percent down, called buying on margin, when you purchase such investments through a non-retirement brokerage account.

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Real Estate Real Estate Investing For Dummies Cheat Sheet

Cheat Sheet / Updated 03-09-2021

Real Estate Investing For Dummies covers tried and proven real estate investing strategies that real people, just like you, use to build wealth. Investing in real estate isn't rocket science but does require doing your homework. So if you were expecting to turn into an overnight multimillionaire then you're not in the right place — but if you're searching for a solid long-term investing strategy and the tools to get you there then Real Estate Investing For Dummies is the right book for your needs. Following are some of the key principles that we cover more in-depth in the book: Copyright © 2019 Eric Tyson and Robert S. Griswold. All rights reserved.

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Real Estate Risk Management Plan for Real Estate Investments

Article / Updated 03-06-2020

Many people get into the world of rental real estate without knowing how much risk they’re exposed to just by owning real estate. You may read stories in the newspaper about lawsuits against deep-pocket defendants without much personal concern, but it’s a reality check when you’re suddenly considered to be the one with those deep pockets. Real estate investment property owners need a plan to minimize risks because they’re frequent targets of those who suffer a personal injury or whose property is damaged. But those aren’t the only lawsuits targeting rental property owners. Many studies have shown that real estate rental property owners are sued more than any other single type of business entity. In a recent but troubling trend, some legal advisors are encouraging residents to file lawsuits claiming that their rental unit is not habitable. Some of the more unscrupulous tenant rights attorneys and organizations even discourage their clients from first contacting the rental property owner for needed repairs and maintenance, instead preferring to file complaints with governmental agencies and then use such reports to bolster their claims when seeking damages such as rent abatement and personal injury claims. The primary targets seem to be self-managed properties or management companies that do not have a strong track record of excellent maintenance and detailed documentation. Robert has served as an expert witness in over 2,000 litigation matters throughout the country involving all types of real estate for over 25 years. Lawsuits filed against property owners and management companies seem to be recession proof. But, in addition to proper maintenance and repairs and excellent customer service for tenants, he does have one specific recommendation that will inoculate you from many of these less legitimate lawsuits — eliminate or cap the “prevailing party” attorney fee clause in your lease or rental agreement. Property owners like this clause as they envision collecting their legal fees and costs when evicting tenants for nonpayment. But tenant rights attorneys see this as an opportunity for them to get even a minor judgment against a property owner or their management company and then be able to collect huge legal fees and costs. So, take Robert’s advice and simply eliminate the attorney fee clause or at least cap the prevailing party to not exceed $1,000 or $2,000. You will have removed a tempting incentive for aggressive legal sharks looking for an opportunity to turn a “small claims” case into a major lawsuit with the potential of six-figure legal fees and costs. You can take steps to reduce and control your risk. Consider the following suggestions as preventive actions to minimize the potential of being named in a lawsuit: Regularly inspect the property as part of a thorough maintenance program. One of the easiest ways to minimize the potential of being named in a lawsuit is to routinely inspect your property and correct any noted deficiencies, such as health or safety problems. Be sure to comply with all advance notice of entry requirements and access limitation laws before going into the rental unit or going onto the tenants’ exclusive exterior areas. Make and retain copies of your inspections and document that all items were promptly and professionally addressed. If possible, see if your tenant will sign off on the completion of any work done so you will have proof that at least at that time the tenant was satisfied with the condition of his rental unit. Listen to and address tenant complaints. Be open and responsive to feedback from your tenants and others expressing concerns and consistently require tenant maintenance and repair requests to be in writing, even if you write it down for them and have them sign. Always obtain written permission to enter the rental unit and carefully document any issues where the tenants make complaints, but then make access to address the problems difficult or delayed. A track record of quick response to complaints, with the proper documentation (paper-trail) to prove your timeliness, is the best defense if you find yourself defending a claim or lawsuit alleging uninhabitable conditions, an injury, or property damage due to your negligence. Transfer the risk to others. Transferring risk from the owner and property manager to the vendor or supplier is sound policy for managing and minimizing risk. You can do this contractually by only using licensed and qualified contractors and suppliers who provide their own insurance coverage. Require that they provide written evidence that they have proper insurance coverage in place naming you individually and the legal entity that actually holds title to your investment property as an additional insured prior to performing work or providing materials. If you use a management company to handle the property management for you, make sure that they require insurance declaration forms from all vendors and suppliers documenting $1 million minimum coverage limits prior to doing any work or even making deliveries to your property. Have a file for hard copies of the insurance declarations with a tickler system to make sure that this important insurance coverage does not get canceled or lapse due to nonrenewal or nonpayment. Remove certain risks or never allow them in the first place. For example, many owners and managers of residential properties have removed diving boards and pool slides. Commercial property owners have restricted access to the roofs of their buildings with emergency door hardware (which may sound an alarm but still allows roof access in case of an emergency). Although you can minimize your risks by taking some of these steps, you can’t eliminate all risks completely, and that’s why you need proper insurance coverage. Insurance is a vital element in a risk-management program.

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