Should My First House Be an Investment Property?

Guest Blogger Steve Howe, from Minnesota First Time Home Buyers, gives us a great post today.

Whether it’s a craze of the HDTV Generation (referred to as Gen-HDTV) or an idea implanted into the head of young people through books and seminars, I am approached by a number of new buyers who think they can cut their teeth in real estate investing before ever owning a home themselves.

Big Mistake.

If you’re a new investor and just learning the ropes of cash flow, depreciation, and capital gains, then you’re probably digesting enough new information to choke a horse. Now imagine you’ve never actually even bought a property or had to maintain your primary residence. Let’s say you’ve been renting or living with mom and dad your whole life and read somewhere that it’s a great time to invest in real estate, so you think you should jump in.

Can you see where this might be a problem?!

I never want to doubt anyone’s ability to make their goals a reality, but having worked in real estate for a while I know there is a certain level of education that needs to happen before you can be truly comfortable with tens of thousands of dollars being put up towards an “investment”.

For those Robert Kiyosaki readers, you’ve heard “your house is not an asset – it’s a liability” and in the past 3 years we’ve seen why this is true. A lot of people made a lot of bad “investments” with real estate, simply because they weren’t educated enough to protect themselves from a collapse. Sadly, a lot of these unfortunate souls were new investors trying to take advantage of flipping, land-lording, and rapidly increasing housing prices. They had owned property for their primary residence, but never played the investing game. Needless to say, they lost. And I’m afraid the same would be true for a large percentage of First Time Home Buyers who try to become Real Estate Investors and Real Estate Owners all at once. It’s like learning to drive a car and become a mechanic simultaneously – the two seem related but are drastically different skill sets. It’s probably easier to understand how the car is put together after you’ve mastered the driving part. If you’re willing to put in the work and due diligence to make sure you know what you’re getting in to, then by all means a First Time Home Buyer may become an investor. But don’t get too excited about the late-night TV ads and Property Auctions rolling into Minnesota – they are all ploys to make money, not actually educate you.

My advice to those of you who are looking to become investors but have never owned a piece of real estate: Get Educated.

Attend one of our free Investing Seminars or First Time Buyer Seminars and learn what the ins-and-outs of the Real Estate game are before getting too excited. It’s no doubt that this is one of the rare opportunities we will see in our lifetime for buying discounted properties, but if you jump in too fast with wild expectations, you may turn into another statistic.

Best of luck!

Steve Howe is a full-time Realtor with the Minnesota Real Estate Team and Re/Max Advantage Plus. He specializes in First Time Home Buyers and runs a monthly First Time Buyer Class to help educate new buyers in this challenging market. Check out Steve’s blog for MN First Time Home Buyers.

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