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Real Estate Investing Mistake Made in 2005

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Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties,
purchased income property without doing their homework. If you want to make money investing in real
estate, beware of these five surprises.

real estate investing,mistake,real estate investors,investment seminar,investing teleseminar,Jeanette Fisher

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Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties,
purchased income property out of state. California investors bought houses in Florida, Texas, and
Oklahoma. Florida investors purchased houses in Louisiana. Texas investors purchased in Las Vegas. Many
of these investors made millions of dollars because of the appreciation in hot markets.

On the other hand, in 2005, some beginning investors lost their hard-earned investment capital or only made
a meager profit because <b>they failed to do their homework on the out of state area's real estate market and

If you 're thinking about buying investment properties in a different state than you're accustomed to, beware
of these five surprises.

<b>Surprise # 1 - 'These (extra) costs are the norm in this state!</b>'

Besides extra closing costs like pricey surveys, common in Florida but rare in California, other surprise
costs included higher transfer fees and taxes. Property taxes in Florida cost much more for investors in
Florida than in California. On the other side of the country, out of state investors were shocked by
California's state tax held in escrow: 3.8% of the property's SALE'S price, no matter the actual profit made.
In other words, an investor who made a quick profit of $20,000 on a fast flip could have more than the profit
held until the next year's income tax filing.

<b>Surprise # 2 - 'You can't lease this property!</b>'

New home developers and many Homeowners' Associations (HOA)s prohibit property owners from leasing
their properties. Some of these restrictions got passed, without the investor being notified, during the
property purchase phase. You must read the fine print to see if any clauses prevent the rental of the property.
Home builders, to keep the value of the neighborhood up, added restrictions requiring the purchaser to
occupy the home as a primary or secondary residence.

<b>Surprise # 3 - 'This house will only rent for $750 per month, not $1200!</b>'

This was one of the top mistakes made in 2005. Large real estate investing groups, selling out of state
properties to local investors, inflated the rental income. Because so many houses were purchased in a limited
area by investors, a rental glut lowered expected income. This created hardships for investors who suddenly
had to pay out hundreds of dollars a month instead of reaping promised profits.

<b>Surprise # 4 - 'You can't sell this house, now!</b>'

Some investors who couldn't rent the out of state property decided to sell because the values did rise
significantly while the house was built or during the purchase time. However, many investors were stunned
when they were told they couldn't sell the property within the first year after purchase. Restrictions
prohibiting real estate investors from quick-turning their properties is a trend that is growing increasingly
popular with some developers.

<b>Surprise # 5 - 'Houses don't appreciate 30% per year here!</b>'

Perhaps you've attended or been invited to a high-power investment seminar that promotes out of state real
estate investing. Some of these 'investor clubs' really are promoters who receive kick-backs in real estate
commissions, property management fees, mortgage loan fees, and even fire insurance premiums. They tell
stories of huge appreciation gains, which are probably true. However, not all areas enjoy significant
appreciation--year after year.

Don't make the costly mistake of not fully researching the complete market customs and restrictions in the
area where you're thinking about investing. If you can't afford to go to check out the area in person, choose
another area that you can visit.

Copyright © 2006 Jeanette J. Fisher

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