Blog Post 3

Investing

Kasper Hovannisian

Fin 180

5/9/11

For as long as I can remember I have always wanted to get into the real estate business. My family has done real estate for years so I grew up wanting to follow in their footsteps. Out of all the real estate activities there are, in my opinion investing is the most interesting and exciting field to get into. Whether it be flipping houses or owning rental properties the investing activity has many opportunities to build a solid business.

There are many reasons for someone to enter the field of real estate investing. One huge plus side is that you can use rental properties as a tax shelter. Many people who do not have a real estate background have begun investing in property for this very reason. If you are lucky you can get a place rented and take in a solid profit from rent each month of the year. Having a positive cash flow from rent can help to build a steady income that many other activities in this business do not provide. Many brokers and agents are forced to live from sale to sale with out knowing what the future holds but an investor with a rental property that creates a steady cash flow will always have that steady income to fall back on.

Along with rental property investments there is also a lot of money to be made in flipping houses. Flipping a property for a profit can be one of the most profitable and exciting things to do in this business. In a down market such as the one we are in now there are many cheap foreclosed homes on the market. Many investors are using this down market to buy these cheap beat-up homes and fix them up so they can sell them at a much higher price. Although this sounds simple there is one factor that has kept this process very difficult to do. Because banks aren't lending an investor needs cash to purchase these homes and most people do not have that ability. But if someone has the cash and the knowledge of the market there is a lot of money to be made in flipping houses.

With all of the positives an investment can create there are also many risks involved with investing. As defined in our textbook a risk is, "the likelihood of an occurrence of an unwanted event." There are many types of risks in this business which include; market risks, management risks, inflation risks, financial risks, and liquidity risks. Because of all of these risks an investor must be prepared for the worst case scenario. You never know how the market is going to change and as we are experiencing now, real estate isn't as safe as everyone thought it was. Ever since the market turn and financial crisis many homes have gone to foreclosure and single family homes were not the only ones effected by this. Many investors in the valley lost millions of dollars worth of assets and hundreds of properties to foreclosure. So no matter how good a deal seams there is always a high risk in real estate investment.

Real estate investment is a field where knowledge will prevail. Understanding the basic principles will help an investor make good decisions and not get caught in a bad situation. This field has and will always be high risk high reward but it can create some exciting times and high profits. So whether you are an average guy or Donald Trump real estate investment can be your next business venture.

Work Cited

Dias, Julian, and Andrew, Hansz "Investing Activity." Real Estate Analysis Enviorments and activities. Kendall Hunt Pub, 2010. 229-245. Print

Ogden, David. "Foreclosures - Fresno Polotics / Exmainer.com. "Washington DC News, Washington DC Information, Washington DC Events - Examiner.com, Web 07 May, 2001 examiner.com/popotics-in-fresno/foreclosures