Investing in real estate

Answer: Don't look at the obvious. We've all heard stories about Homeowners who purchase the first property they see and end up making a substantial profit when they sell six months later. Those opportunities aren't accidents. The best real estate investment usually needs to be searched -- and researched.

First, residential investors should always look for "distressed" properties located in popular neighborhoods. Astute Buyers investigate the Seller's motivation to sell. They ask, "Does the Seller need to sell?" If, for instance, the clothes closet is half-empty, it may be an indication that there is a split family, and the Seller must sell. Experienced investors do not buy the first property that looks good. They do "comparison shopping." In other words, they check the price and compare it with others in the area. They investigate the market.

Real estate sales associates can be a big help in this area. They can give you comparable selling prices of homes in the community and tell you how long properties have been on the market, an indication of how active -- or inactive -- the market happens to be.

Check the appreciation in value of homes for the past two years. That's one indication of where prices may go in the future.

One of the keys to getting the best buy is to determine why the Owner wants to sell. If he or she is not highly motivated, they will not be likely to negotiate. On the other hand, the Seller might be highly motivated to sell, due to many reasons such as a death in the family, or he or she may have been transferred or laid off. In that case, there is a good chance they may be willing to discount their property for the peace of mind and convenience associated with a quick sale. If the Seller is highly motivated, ask some questions.

It's also important to avoid becoming emotionally involved while negotiating. Don't let yourself get swayed into making a decision because you like the white carpeting or that bay window in the kitchen. Evaluate the investment on criteria that cannot be changed without great expense, like location or floor plan.

Try to avoid making "on the spot" decisions -- go home and think about it before you commit. See other properties that are similar, and take photos to accurately compare all the details. Take someone else along who is not involved, and let them point out any potential pitfalls you may not have seen.

There are many factors involved in making a good investment. But it takes patience, objectivity, and a keen eye. For those who have those traits, real estate can be a sound financial investment as well as your home.

Answer submitted by Robert E. Hubbell, Coldwell Banker Hubbell Real Estate