They say a fool is born every minute...and from the sound of some so called "advice" posted to some short sale and investing blogs, that may be an understatement. The tragic fact is that many of the so called "guru's" out there have an extremely limited amount of experience in a tough market; some have turned one or two deals and suddenly consider themselves an expert. For this week's Friday File, we decided to round up some of the worst advice on the web and briefly explain why each is a risk you can likely live without.
Bad Idea #1 - Begin making repairs before taking possession of the property.
Comments: Although this might sound like a good idea to the novice investor, it is a risky proposition that most newbies should avoid. Yes, making repairs ahead of time can help reduce the holding cost and help sell the property sooner but it could also leave you high and dry with very little recourse. Homeowners may suddenly take advantage of a redemption period or other plans may fall through. While there are situations where this is a viable option, it is for seasoned investors only.
Bad Idea #2 - Only flipping investment properties.
Comments: If you already own a home, the tendency is to look at investment grade properties only however, this could be a costly mistake. Purchasing a new primary residence and selling your current home may make more financial sense especially if you can take advantage of tax-free capital gains (up to $250,000) and owner occupied financing programs. Remember, to qualify the home must have been your primary residence for 2 of the past five years with five years of total ownership. The total gain on the sale of your own home may more than pay for the new property with funds left over to purchase an investment property.
Bad Idea #3 - Doing everything yourself.
Comments: DIY might sound like a great idea but the reality is often far less appealing. Not only does it often take a lot more time and money than originally anticipated, but your Uncle Sam is not supportive when it comes to taxes. Remember, most of your own labor is not considered a viable write-off...only supplies. By hiring others, you get to deduct for supplies and labor without the additional headache and hassle.
Final Thoughts...
Investing in short sales is often easier than most people realize; the key is to truly understand how each situation impacts your own bottom line. Stop working hard and begin working smarter by informing yourself of all the possible options available to get started.
http://www.assetunlimitedfinancial.com/
See you at the top!
Martin Crawford
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