How to Jump Over The Most Common Real Estate Pitfalls

Is it really smart to invest in real estate? Who can know for sure? Like any forms of investment, there are risks to consider. When the good outweighs the bad, then perhaps, putting money in real estate is a good way to start building up your investment portfolio.

How can we know which way to go? Real estate experts have identified major pitfalls to avoid if investing in real estate is what appeals to you:

Do not bank on intuition.

Intuition is defined as “hindsight”, or an inherent “inner warning”, that oftentimes does not veer towards the positive but leans on the unexplainable feeling of doom. Most people would sell their homes based on a pessimistic feeling that the real estate market will soon crash, or the long-perceived real estate bubble is beginning to burst, hence the sooner they sell their properties at prices they can still command, the better.

Most likely, the worse case scenario never happens. Panic paralyzes the mind from thinking logically through a situation, thus, past experiences are forgotten. When real estate prices do slide, they don’t happen overnight. Unlike stock market positioning where prices can nose-dive drastically, real estate values may only suffer a decline, but not a total burn-out. Those who sell their homes with the prospect of making a profit on it while they still can, and purchase another, when real estate prices slide are heading towards being homeless, or into rental homes themselves.

Look at the odds: selling your home will displace your family for a while, it will cost you your agent’s commission, new mortgage rates may even be higher than the previous ones you were paying, the inconvenience of moving and leaving a familiar neighborhood, including other attendant costs. In the end, your calculator will register a deficit rather than profit!

Keep a discerning mind; do not believe everything you read.

That value of real estate properties will always go up is more of an illusion, rather than fact. This line of thought is dangerous as it wafts “speculative” investing – a financial stratagem that can be potentially profitable but very risky. This can imperil your good investment approaches. Real estate agents are moved by the prospect of earning commissions, naturally, they will outsell one another by sales pitches that can close the deal.

Quandary with Rentals.

Purchasing properties with the prospect of renting them out is sound, however when this is done during an economic slump, this may jeopardize your investment.

When real estate foreclosures are high, some investors take it as a good sign for renting out properties. Some may experience demand, but oftentimes people move away when they lose jobs. By the law of supply and demand, when there are few renters, rents will plunge.

Avoid risky loans like a plague!

Mortgage loans come in many options, can be all attractive, but caution should be exercised. As in all things, not everything that sparkles is gold.

Interest-Only Mortgages don’t demand payment of the principal while other mortgage options may require regular payment of the principal, or no payment at all during the early years. But interest rates can increase monthly and the increase can cut deeper on your mortgage. If sufficient payment is not made, your total mortgage loan will cost you more than what you home originally costs.

Keep your investment straight and you have more to keep.

Funding your other investment portfolios with the equity on your home is risky. Same is true with financing second or third mortgages on a property. In the event of payment defaults, equity on such property shall satisfy the loan taken from the first mortgage lender; and any remaining amount, shall be used to satisfy obligations with the subsequent lenders. This, however, rarely happens.

Study. Probe. Evaluate. Do not speculate.

Real Estate Investment is flourishing – a sign that it is a profitable venture. No wonder, real estate industry remains a formidable choice among those who want to get a crack on the fortune pie. Having identified the common pitfalls in real estate investing will narrow down the margin of those who ventured but lost, and jumpstart the prospects of those who want to make it big.

Helen L. Erickson

Sarasota Real Estate

A Brief Look at Estate Liquidations

An estate liquidation is a lot like an estate sale for the reason that the main point is to liquidate the property by means of a property sale company. Usually this will involve everything on the property such as belongings in safe, household heirlooms too precious to be kept in the home, property, vehicles, boats, RVs, livestock, and anything else that the estate company might cover.

Although it is essential in the majority of states that a real estate professional must be there to create the paperwork for the purchase of real property, most other merchandise do not need any other kind of permit apart from the local ones necessary to run a business in your particular state in which the liquidation is happening.

In many cases, the family will have an attorney in order to supervise the procedure for liquidation and to keep the program straight on legal issues of stocks and bonds being exchanged, assets liquidated and any real property changing hands under legal standing.

Estate liquidations take place mainly like estate sales, with all the liquidators preparing the property and items to be sold for a community sale. The majority of liquidators charge a percentage of the net income from the sale.

Estate Liquidation vs. Estate Sale

The primary distinction between estate liquidation and a sale is that the liquidation can involve collections, bonds, art, stocks, and real property. Normally estate liquidation is followed by real estate agents, lawyers, CPAs, and appraisers, while a property sale can be carried out by any person with an understanding of the value of household products and collectors’ items involved.

Property is categorized into two basic types: personal property and real property. Each may be sold or liquidated. Estate, on the whole, is often regarded as an asset, in that it can be liquidated for money. In most cases, property is liquidated in order to provide a way to obtain money to purchase other property; for other people it can be liquidated in the bankruptcy process.

Relative Liquidity

Just about all possessions, which includes land, property, jewels, metals, bonds, and stocks, may be seen as relative liquidity. Although such things are not regarded as property per se, money that can be made from it is considered the liquid asset.

Cash is accepted currency, and you need to use it to buy everything, which makes it totally liquid. Property, like a house, isn’t actually liquid; however it may be used as a currency by means of its liquidation, sale, or trade for related properties.

Why Does a Property Become Liquidated?

The reason why an estate could be liquidated or sold can vary. As an example, you could possibly liquidate a holiday residence in order to create money to cover your child’s education.

Estate liquidation also often takes place due to bankruptcy. A bankruptcy professional may buy your home liquidated in order to pay off your collectors. Within the law, estate liquidation practically always describes the means of selling off a bankrupt debtor’s home to meet the debtor’s needs.

What Occurs When the Bank is Involved

In its simplest form, estate liquidation is a sale of the property or home. In a bankruptcy, for example, you would list all of your property to a specialist to look it over and makes a decision as to what needs to be marketed in order to pay off creditors.

Based on the debt of the estate that is bankrupted, the specialist might decide to not liquidate any parts of it.

Whenever your estate is liquidated in bankruptcy, you get any of the profits remaining after paying back lenders.

Real Estate Institutes in India

Indian real estate sector witnessed dynamic growth since the beginning of the millennium. Developers started launching projects after projects, which used to be supported by innovative financial tools offered by private equity & venture capital funds in addition to traditional financial institutions. Government equally supported the growth with its growth oriented policies. Housing Finance Institutions contributed its share in the development by offering loans liberally to prospective home buyers. On the other hand, developers started formulating innovative marketing, sales and customer service strategies. They suddenly moved from direct and local level marketing to national and international level marketing. World Wide Web became one of the most common medium of promotion.

These developments resulted in massive requirements of trained, competent and specialist human resources for the property sector. Unfortunately, since the time realty business started growing, neither the players of this sector nor the Government ever thought of any long term strategy to develop manpower for this important economic sector, except occasional airing of concern. The result is the acute manpower crisis in the Indian property sector.

However, it is worth to mention here that there have been few initiatives to offer real estate education in India, most noticeable NICMAR and NIREM.

NICMAR, National Institute of Construction Management & Research, offers full-time programs in various areas of realty and construction management through its different campuses. The courses are of two-year, one-year and six-month duration. The institute also offers courses through distance learning mode. But there is no realty related courses offered through distance mode. Moreover, almost all of the courses of NICMAR are focussed towards construction and development.

IDS NIREM, National Institute of Real Estate Management, on the other hand, offers one year PG Diploma and six months Diploma programs in various areas of property business through distance education mode. These areas include real estate management, property marketing, sales & brokerage, realty finance, property investment, appraisal, facilities management etc. A key feature of NIREM is its affordable tuition fee which is less compared to most of the other professional institutes.

To conclude, I must say that the above initiatives towards real estate education are definitely praiseworthy but are insufficient compared to the human resource needs of the Indian real estate sector. Unless there is an integrated planning towards introduction of the system of real estate education in India, this sector will continue to face manpower crisis.