May

21

For the vast majority of people, the best thing to do is concentrate on their personal residence when it comes to real estate. Building a portfolio of real estate can be an extremely complex venture, as there are many moving parts to the process.

There are so many variables that come into play. These include location, negotiation skills, liquidity, devotion of management, time commitment, closing costs, insurance, taxes, repairs, etc. Most people would be better served if they focused on their personal residence and looked to maximize the profit through this venue.

If one wants to become successful in investing in real estate, one needs to be very knowledgeable about mortgages. Not just conventional mortgages but interest only, balloons, ARMS, and some other esoteric mortgages that all can be used depending on the needs and wishes of the investor. Rates and points also factor into the equation, as do credit ratings, down payments, etc. Thus, this is not a market that lends itself well to the neophyte.

And nefarious and ill-informed mortgage brokers abound. In my view, the barriers to entry in the mortgage broker business are few. It is easier to become a mortgage broker than a massage therapist. So finding a qualified mortgage banker or broker can make all the difference in the world. I have found that similar to the bond market, where the really big money likes to play.

One of the great plusses of real estate is that it is the only investment that one can make and live in it at the same time. Also, you can watch it on a daily basis.

If one wants to play the real estate market, one can use such vehicles as ETF's, REIT's, and stocks of mortgage companies and builders. Subcategories include aftermarket stocks such as Home Depot and Lowe's. Further down the line there are subgroups such as cement, wiring, and plumbing construction equipment like Cat and Gradall.

Before considering purchasing residential real estate, I suggest an intensive study of the industry and the markets that one wants to be involved in. All real estate is regional. Commercial property can become even more complex. Once again, in my view, caveat emptor.


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