My phone rang, and at the other end was someone who can safely be called a risky investor. He was from, and in, California, and at the moment he was barreling down the Pacific Coast Highway, attempting to drive, talk, and surf the web for cheap real estate deals, all at the same time.
That’s not that made him a risky investor. That came from the fact that he was looking to invest in a city that he had never visited, in which he had no human connections, or of which he had any knowledge.
That might sound strange to you, but many otherwise smart people get caught up investing in places about which they know next to nothing. Wrong decision.
Investing in places where you have little or no knowledge of market trends, inventory, future plans for development, construction costs, or the lending climate is like throwing money away. By purchasing property “sight unseen,” you are accepting at face value (only without the “face” part, since you haven’t seen it) all of the hidden unknowns that experienced investors spend time and money studying, the better to make informed decisions.
I’m not simply talking about doing research online. Yes, the internet is helpful for gathering many important facts. But it provides little in the way of“boots on the ground” intelligence about the current buying and selling market, or about who the ideal buyers and sellers are in any given region. That has to be learned firsthand.
There are some great ways for interested investors to learn about a neighborhood. These include determining market trends, visiting the city’s permit office to learn future planning goals, investigating housing prices and rental rates, examining regional demographics, and most important, finding out the job market and prospects for employment in the region.
Most serious investors or people of business would think it ridiculous to build or invest in a market where the jobs are being transferred to another city. Knowing the market is probably the single most important factor on an investor must get a handle.
As a real estate professional, it’s important for me to know how deep are an investor’s pockets, and what are his or her holding parameters. If this sounds unfamiliar to you, chances are you’re not yet ready to become an investor.
Investing often requires more time and money for marketing than most people realize, and these “unseen” potential costs need to be discussed before making the transaction. If an investor doesn’t consider holding cost, repair cost, marketing cost, and factors like downward market trends, then he isn’t prepared for when these expenses cut into the bottom-line profits.
Getting into the business of investing means knowing that purchasing a property is a small piece of the puzzle. If your resources include only enough to make the purchase, you’ll have to consider where the other monies will come from. That’s the foundation of Strategic Real Estate Investing.
Merrick Damon Williams
MerrickDamon Residential Brokerage
Georgia, Florida, Costa Rica