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Investing in Real Property: Take the Gamble Out with Backup Plans

By Daleim Nust

When the recession became a real problem to the economy, the real estate market was the hardest hit in terms of investment properties. The value of homes and other property types plummeted quickly and drastically. Homes that were valued in the millions of dollars were now sitting at an all time low of barely six figures. Now that the recession has lifted somewhat, what does that mean for investing in real property?

The current market, while still volatile, is starting to recover. However, because it is still volatile and any investment can take a turn for the worse, learning the best techniques for the specific market you are hoping to be investing in is necessary. Some basic knowledge is needed to invest wisely because doing so can net some large profit margin success stories; however, doing so the wrong way or with too much risk involved can leave an investor with nothing.

There are very few statements you can make in the world of investing money that are universally accepted as fact. One of them is this: when interest rates go up, bond prices (values) go down. In simple terms, the fixed interest payments that these securities pay become less attractive to investors as rates go up. So, many investors will sell their bonds... sending prices down... and put their money someplace else. Since the government had been holding interest rates down for months to stimulate the economy, rates are likely to go up in 2011 or 2012, if the government stops this policy as planned. Investing money in bonds will then be a loosing proposition if rates rise significantly. That's a fact and about as black and white as investing gets.

While these are just basic questions, the answers to them can help determine the outcome and garner a successful investment. The answers are called market indicators and they are used to help the investor make a proper decision about investing in a property or not.

To be sure, the goal is not just to come out even. You would rather gain ten dollars on everything, bringing in an overall gain of ten percent. As you can see, however, the gains can sometimes make up for the losses. You will not become rich overnight, but you will not go broke. If you are patient and take your time, you can make a lot of money.

On the other hand, high inventory markets will more than likely take longer to contract out a property and at a much lower selling price. Additionally, inventory can change with the seasons, such as higher inventory in the winter and lower inventory in the summer. This is why in the Hamptons, NY, summer homes typically rent for much more than any other season or area.

All investing is risky, which is why when an investor chooses real property, he should have at least two backup plans in case his first choice does not work. Not having a backup plan could prove to become quite costly, especially for those house flippers who only receive a 10 cent on the dollar profit. Real estate investing is clearly a volatile market; however, investing in the right way can become quite profitable.

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