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Real Estate History - Real Estate Investing Mistake of 2005


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									                                                 Presented by Daniel Toriola

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                                            #1 Real Estate Investing Mistake Of 2005
                                                            By Jeanette Joy Fisher

   Over the past few years, real estate investors, hungry for break-even or positive cash flow rental
properties, purchased income properties 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

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

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

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

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 SALES 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.

Surprise # 2 - 'You can't lease this property!'

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. Surprise # 3 -
'This house will only rent for $750 per month, not $1200!'

This was one of the top mistakes made in 2005. Large real estate investing groups, selling out-of-state

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properties to local investors, inflated the rental income. Because so many houses were purchased in a
limited area by investors, a rental glut lowered the expected income. This created hardships for
investors who suddenly had to pay out hundreds of dollars a month instead of reaping promised profits.

Surprise # 4 - 'You can't sell this house, now!'

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.

Surprise # 5 - 'Houses don't appreciate 30% per year here!'

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 check out the area in person,
choose another area that you can visit.     Copyright © 2006 Jeanette J. Fisher

Jeanette Fisher offers FREE "How to Start Real Estate Investing Teleseminar," free ebook, "The Truth
about Making Money Flipping Houses." Ever wonder how those multimillionaire real estate investors
got started? You might be surprised at how easy it is to buy your first investment property!

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                                                                                                                                   Page 2
                                                 Presented by Daniel Toriola

                                     The Big Four Reasons for Investing in Real Estate
                                                             By Andre McFayden

The Big Four Reasons for Investing in Real Estate by Andre McFayden

The 4 BIG benefits of investing in real estate are:

1) Cash Flow - This is your spendable income after deducting all operating expenses and mortgage
payments from rental income received.

2) Loan Amortization - With each mortgage payment you make, your loan balance is reduced and your
equity increased.

3) Tax Savings - Investors are allowed to take a depreciation deduction for rental properties. By taking
this deduction, the taxable income from the rental property is further reduced.

4) Appreciation - Over time,real estate generally goes up in value.

When combined, these four factors can create a great amount of wealth.

Follow these links to learn more about real estate investing in general, and also about Fresno real
estate in particular.

This article may be reprinted if credit is given and all links are kept intact.

Copyright©2005 Empire Real Estate Group, Inc.

Andre McFayden is Vice-President of Empire Real Estate Group, Inc. in Fresno, CA

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                                            Presented by Daniel Toriola

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