Audrey Deschenes
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Getting Started: A beginning guide to investing

How to buy investment property

Investing in real estate most likely won't produce the get-rich-quick results promised by many a late-night infomercial. But for investors willing to do some homework, make a good purchase and properly manage a piece of property, the rewards can be substantial.

Various strategies can be used on the road to real estate wealth. In one, investors "flip" properties by buying a house, renovating it in short order and selling for a profit. In another, investors purchase the property with the intent to hold it for many years.

A common approach is to purchase an income-producing property such as a single-family home, an apartment building, an office or retail building or farmland with the intent to rent the property or units within it.

The downside: Investment in real property — unless you're buying shares in a real estate investment trust — isn't as liquid as putting money into the stock market. And real estate markets are often cyclical in nature.

Before you consider real estate investing, think about this:

  • Don't overpay for a property:. Good research, due diligence in real estate parlance, is essential to spotting a deal that will be profitable.
  • Rules and regulations: Real estate is governed by a broad set of federal and local requirements.
  • Tenant screening: It's critical to your success that you have good renters who pay on time and don't damage the property.
  • Start small: Your first purchase may be a duplex or four-flat, something simpler so that you can get the hang of management.
  • Avoid bad partnerships: First-time realty investors often join up with more seasoned real estate pros, but you'll have to be comfortable with your partner.
  • marketwatch