The Evolving Nature of Property Investment

It is time that the real estate industry rethinks the way investment real estate is done. For years, every add you see is how you can buy homes on the cheap and sell them immediately at an amazing profit. Here's the issue: that method of investment doesn't work any more. As a matter of fact, when you consider it, it didn't work that well in times past, either. Still, when you talk to the average guru, he still tries to ram the "flip that house" mantra down your gullet.

Fortunately the industry is starting to change. Good agents are learning that a focus on always flipping properties ends in inflated house prices, followed by a crash. They know that gambling on the price of a house is not the best way of investing in real estate.

Several training companies are now teaching classes that promote much more stable real estate investment techniques. For example, one provider of real estate CE credits is now only offering courses based on this long term philosophy. In fact, this educator teaches that real estate should not be run as a gamble, but as a business. When you run real estate as a business, you can make more accurate predictions, effectively manage risk, and dodge the deep losses of the past.

One main factor in this paradigm shift is looking at property operations rather than just comparable prices. Even if your plan is to quickly sell the property, you need to know exactly how much the property is expected to make/lose per month, even if it doesn't sell. Look at all the costs, from mortgage to snow removal to air conditioner. Look at all the incomes a property has, and if it doesn't have any at the present, be very careful. There aren't many financial drains more painful than empty property.

Another teaching of this new investment school is that an investor's focus does not need to be single family housing only. Multi-famly properties like duplexes and apartments can make much more secure investments - if you understand the business. For these new teachers of real estate, there's no knocking door to door telling people that you're there to "help." Nobody every really believes that anyway, and no one is going to thank you for buying their home at less than market just so they can avoid bankruptcy.

Other items in the new philosophy are the facts of exactly what makes a good property a good property. What are the real, tangible benefits of owning a bit of investment property? What are the real tax benefits? And what is the difference between cash flow and income/loss?

As more agents and brokers follow the example of this real estate education company, perhaps the industry will lose the correctly-earned stigma of being shady and unprofessional, because they'll be acting with the long term in mind, not just making a quick buck.