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How to Eliminate Risk Real Estate Investment

Aug 17, 2007
Real estate investment is one of the best forms of investment that provides maximum returns. However, it carries with it the element of risk, which can be eliminated by paying careful attention to the nuances of such investment before going ahead. It would not be prudent to part with ones money before seeking sound advice from experts. Many people simply invest their hard earned money in real estate on the basis of existing trends, which is not a sure shot way to succeed.

The nature of such investment carries with it all the rigors of ownership of property capable of providing high returns. In fact, it is a business that requires constant care and monitoring to yield the desired returns and cannot be a one time invest and forget proposition.

Taking the help of a professional in the field of real estate investment would be the way to mitigate, if not altogether eliminate, the risks involved in this business and ensure that the best returns are available. For best returns it is of paramount importance that one assesses ones needs in terms of the tax benefits available and also the expected value appreciation, which may vary from one investor to the other.

Often, there are unconfirmed claims of very high returns for a particular piece of property, which may or may not be true. For the individual investor, it would be very difficult to verify this. However, a professional real estate agent would be able to check matters such as rents, payment history, taxes, expenses, deposits, future modifications, all of which have a direct bearing on the overall profitability of the investment.

Inspection for physical structural damage, pests and other type of recurring problems also needs to be done, which is the domain of the expert in the relevant field. It will be cost effective in the long run to use the services of a professional inspector for inspecting and assessing the damage.
Inspection and verification of various related documents is a prerequisite along with ensuring compliance with all statutory norms for the proper completion of the deal.

The bill of sale should include all the property including the movable assets with details. The property should not remain vacant ensuring that it is leased out to good tenants. A good idea would be a reference check with their employers and previous landlords, along with credit and financial references. Letters with respect to the status of the tenancy should also be obtained from the tenants and a check that their interpretation of the tenancy agreement is in consonance with that of the seller is necessary.
There will also be a need to get adequate insurance cover for the long list of property liabilities such as parking lots, cleaning facilities etc., among others.
Negative cash flow is one of the things that take a toll on the investment made. This means there are some properties, which require regular cash inputs in big amounts for maintenance and other things. Care needs to be taken to minimize such expenditure, which may affect the duration for which the property can be held.

One of the most important things to do would be to use the cash returns from the property to clear up the debt incurred for the acquisition. The nature of real estate investment is of high value return but is not devoid of risks, which can surely be minimized with careful and prudent planning before acting.
About the Author
Real Estate Investing simplified. We have wholesale investment homes in: Orlando, Tampa, South Florida, Jacksonville, Atlanta, Cincinnati, Houston, Charlotte, Nashville. Check out our online inventory of Orlando Investment Homes .
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