Should I become a real estate investor?

If you are thinking about purchasing real estate for investment purposes, you need to keep these things in mind.

There are four possible financial benefits to investing in real estate:

• appreciation
• positive cash flow
• tax savings
• amorization of the mortgage

If you plan on taking negative cashflow, you should be sure that you will make it up in the other 3. Most investors today expect to get most of their return from appreciation by speculating on certain "hot" markets. Consequently, they are willing to accept little or no cash flow or more commonly, negative cash flow.

Interest rates on investment properties are higher versus those of a primary residence because they present a higher risk. A borrower is more likely to worry abou his own mortgage first if he gets into a financial jam.

Real esate investing has always been a great investment vehicle when used correctly. Some of the best neighborhoods to buy rentals in are the blue collar neighborhoods. The ratio of mortgage payment to rental income seem to be best in these types of neighborhood. You may also want to consider keeping a small amount of money egual to 3 months of mortgage payments in an account readily available for vacancies when someone moves out. The faster you get your property rented the more money you get to keep.

Over the long term, real estate has traditionally out performed many other investment vehicles such as stocks and bonds. However, as in stocks there is a significant difference in risk factor between long term investing and short term quick for profit flipping.

It is possible to qualify for 100% investor loans to get you started in the real estate investment career. The rates are quite high, but if you choose the correct property you will be well on your way to success as an investor.

A Pay Option ARM is a great mortgage for the property investor. It allows flexibility in your payments to offset possible costs associated with rental units, such as vacancy and repairs. It also can maximize the cash flow from a rental property.

Always remember to figure money in for emergency repairs and routine upkeep. If you cannot afford to maintain your property then you will eventually lose money. The pay option ARMS now availible are great for payment flexibilty if any major repairs should arise.

And another nice benefit of the optio ARM loans are they have usually have 3 - 4 different payment options (hince the name pay option ARM). They have a minimum payment, interest only and 2 different amortization payments to choose from each month. The minimum payment can be utilized for vacancies on rental properties.

Investing in real estate requires a long term perspective on the liquidity of the investment, as long term returns are historically very strong, but short term markets are volatile as they are with all types of investments. Because deals are fundamentally land backed, the real estate investor can rest assured that financial services entities are ready and willing to step in and finance and insure the property, which results in much lower startup costs and very low downside risk by comparison to other traditional investments.

Real estate investing must be viewed as a business and your decisions need to be arrived at in a rational manner. You can't become emotionally attached to any properties or tenants. Run your real estate investments like a business.

Currently the real estate market in a state of flux with many markets experiencing declining values. Real estate investors may be able to pick up some bargains and profit, but only if one plans on holding a property for some time.

» DISCLAIMER: The information contained in this article on 'Should I become a real estate investor?' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.