| How did it happen? You spent months researching | | | | need of TLC and repairs. This time the home sold |
| how to invest in real estate. You went to | | | | in a couple of weeks as it was a great deal. |
| seminars, read books and magazine articles | | | | So what happened? Based on my experience and |
| showing the easy way to buy properties to fix up | | | | what was going on in the market, I think these |
| and sell for profit. You may have worked with a | | | | new investors attempted to be landlords when |
| great Realtor to find the perfect property or | | | | the home didn't sell for the price they wanted. |
| came across a FSBO that was a tremendous | | | | Renters can be very rough on homes and after |
| deal. After the closing you worked hard to rehab | | | | rehabbing once, they didn't have the heart to try |
| the home to sell quickly: fixed the plumbing, put in | | | | again. |
| new cabinets or carpeting and repainted with | | | | In my estimation, this couple may have just |
| neutral colors. Now the home is on the market | | | | broken even but more than likely lost money. |
| and it is NOT selling. What went wrong? | | | | They had originally paid $240,000 for the home. |
| Although I am aware that each situation is | | | | They probably had invested a minimum of $7,000 |
| different, I would like to share a story of first | | | | in materials on the repairs that were originally |
| time real estate investors gone wrong. If any | | | | outlined when I viewed the home for the market |
| part of the story starts to sound familiar, you | | | | analysis. The home actually sold for $267,500 with |
| might want to revise your real estate investment | | | | the seller contributing $7,500 for closing costs. |
| plan. | | | | Add in a modest 5% commission of $13,000 |
| Two years ago, I was contacted by a couple for | | | | (though it was more likely 6 or 7%), they may |
| a market analysis on a property they were | | | | have broke even. |
| preparing for sale. I met with the owner at the | | | | This is not an isolated case. I am tracking another |
| vacant home. She was extremely excited | | | | home with another first time investor that I |
| because the home they had bought as an | | | | believe is headed down a similar path. It is not as |
| investment was almost ready to list. It had new | | | | easy to be a real estate investor as the |
| flooring, paint, carpeting, cabinets and countertops | | | | infomercials would have you believe. |
| in the kitchen and bath. I casually asked, "what | | | | There is money to be made investing in real |
| made you take on this endeavor?' The answer | | | | estate especially in the changing market with the |
| was quick and direct. "We are going to make a | | | | high rate of foreclosures. But keep your |
| ton of money!" | | | | expectations realistic. Work with (and listen to) an |
| I prepared the market analysis and came up with | | | | experienced Realtor when selecting a property to |
| a market value of $299,000-309,900. About two | | | | invest in. Do a cost analysis including all repair |
| months later the home was listed for sale by | | | | costs and compare to an estimate of what the |
| owner for $349,900 or 12-15% higher than I | | | | refurbished home will sell when complete. Keep in |
| recommended. I decided to keep an eye on this | | | | mind that the market is always changing and plan |
| house to see how the first time investor would | | | | accordingly. Have your Realtor do an updated |
| fare. | | | | market analysis prior to listing the home. If the |
| The home was re-listed in August with a Realtor. | | | | market has changed, make certain that you price |
| However on closer inspection, the Realtor was | | | | your home accordingly. Treat your investment like |
| the Mrs. Seller who just got her license. Sometime | | | | a business and stop dreaming of a "ton of |
| in October they decided to reduce the price to | | | | money". If you don't adapt to the changing |
| $299,900 but the summer selling season was | | | | market and you price the home too high, it won't |
| over. Minnesota had entered a real slowdown in | | | | sell. |
| the market and the listing was cancelled in | | | | Real Estate investing can be very profitable but it |
| November. | | | | is not for everyone. If you are not prepared to |
| I noticed the home again hit the market last fall. It | | | | work with professionals, listen to their advice, |
| was listed by a different Realtor but the tax | | | | keep abreast of the market and change with the |
| records indicated that the owner was the same. | | | | times, it may be best if you invest elsewhere. |
| The price was now $269,900 and the home in | | | | |