Eileen's Blog

Want to Make Smart Wealth Building Real Estate Decisions?

November 28th, 2011 10:45 AM by Eileen Denhard

Making smart decisions when buying real estate, or for any large purchase for that matter, requires educating oneself on the process and risks and then taking the time to evaluate, analyze and mitigate those risks. The final analysis should then be used to make the best decision possible.

When buying real estate, far too many Americans fail to take even the most basic levels of precaution by doing the proper due diligence. This is troubling because real estate is typically the largest and riskiest asset someone will ever buy. We’ve all learned this many times over in the last few years via the housing crisis, and it will continue happening until people better educate themselves on the real estate process and mitigate their risks.

Flickr user alancleaver_2000

So what issues should a buyer should consider? Most of the items are not complicated, however running through the important tasks when you are actually buying property is time consuming and tedious. Realize if you fail to do the hard work involved to protect yourself, and something goes wrong, you only have yourself to blame. Doing the proper due diligence to lower your risk is the responsibility of you — the homeowner making the mortgage payment.

Note: There is no risk-free real estate. Even the most diligent of buyers who do all the proper due diligence they know can lose money on some deals due to a variety of unknown, unanticipated, underestimated reasons; or simply bad luck.

The main tasks to do when purchasing a property: (there may be more depending on your situation.)

  • Purchasing process – Understanding the overall purchasing process
  • Cash flows and returns – Penciling out an investment property cash flows and how much you will earn on your money
  • Rent vs. own – Doing a financial analysis to see if purchasing makes sense for you
  • Tax benefits picture – Understanding the tax benefits of owning real estate
  • Mortgage financing – Properly evaluating mortgage financing options and offers
  • Homeowners associations – Reviewing the homeowners association finances, operations and any litigation situation
  • Home inspection – Using the home inspection information to make better decisions
  • Dwelling and liability insurance – Do you have the proper type and amount of insurance in place
  • Title insurance and escrow – Did you read through your title insurance policy and all the sales and escrow documents and ask questions if you did not understand
  • Non-standard investments – understanding and possibly avoiding non-standard investments like land, second homes, vacation rentals, flipping property, etc.


Posted in:General
Posted by Eileen Denhard on November 28th, 2011 10:45 AM



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