Should My First House Be an Investment Property?

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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.

Technorati Tags: first time buyer

MN Attorney General Expands Litigation Against Fraudulent Foreclosure Consultants

The Minnesota Attorney General, Lori Swanson, has issued a warning regarding mortgage modification scams and unscrupulous persons attempting to take advantage of people who are struggling to pay their home loans. See this link to see the Attorney General’s warning: http://www.ag.state.mn.us/Consumer/PressRelease/090129ForeclosureConsultants.asp

You need to be extremely careful in the event anyone approaches you regarding a loan modification process. Foreclosure consultants typically represent that they will save a homeowner’s home from foreclosure by negotiating or modifying the terms of the homeowner’s existing mortgage. A 2004 Minnesota law bars “foreclosure consultants” from charging any compensation until after the foreclosure consultant has “fully performed each and every service the foreclosure consultant contracted to perform or represented he or she would perform.”

Investment Property 101 Seminar

Have you always thought about buying investment properties? Have you read all the books, bought all the tapes and watched all the infomercials, but still can’t seem to get started with investment real estate? Attend this FREE one and a half hour seminar. There is no charge at all, no contracts you sign with us, no consultation fees, no hidden agenda. The seminar simply will be an excellent opportunity for you to learn more about our process and meet a team of investment real estate professionals that can hold your hand through the finding, financing, buying, renting and owning your first investment property.

Let our experience get you started!

Register for the seminar by filling out this quick registration form or call 612-281-5419 for more information.

Happy Memorial Day

Today we take time to say Thank You to all the men and women who have served our country since it was founded.

God Bless America!

Why Can’t I Get an Offer Accepted?

For about 60 days now, I have been incredibly frustrated.  Every day I show properties or put in offers on properties only to find out that they were sold yesterday.  I had a property this week that had been on the market only a couple hours.  My customer saw it and we put in an offer immediately.  Although only 5 hours old, when we submitted our offer, they already had 6 offers in front of ours!

Absorption rate is at 4.5 months …total swing from 11.5 months a year ago…inventory is stable but will slowly increase with the foreclosure moratoriums being lifted… Hang tight – but let your buyers know that with absorption rates under 6 months, you can’t be picky and must act quick

Now it just seems to be a running joke amongst my group.  We need to book 5 times as many showings to just get enough to see.  If you want a house, bring your pen cause we are writing offers on the spot if you like it.

I happened to be exchanging an email with a senior REO agent today about a property (that again was sold), in my frustration, I asked him: ”What is up with the multiple offers and properties gone in less than 1 week? Is this going to get easier (for me) anytime in the near future?”  Here is his response:

Absorption rate is at 4.5 months …total swing from 11.5 months a year ago…inventory is stable but will slowly increase with the foreclosure moratoriums being lifted… Hang tight – but let your buyers know that with absorption rates under 6 months, you can’t be picky and must act quick -

Although I understand his answer, it doesn’t make me feel instantly better.  I guess it further confirms the “Foreclosure Wave 2” theory.

Technorati Tags: bank owned, foreclosed property, REO

Flipping Seminar Coming Next Tuesday

Please plan to attend the next Investment Property 201 seminar on Tuesday, May 26 at 6:30 in Burnsville.  We will be discussing how this current foreclosure market can be used to your advantage to flip properties for a profit.  Go here to see more about the Flipping Homes Seminar.