Why invest in real estate? Because real estate, when properly acquired and managed, provides capital appreciation, equity build up, cash flows, tax benefits and a hedge against inflation. Real estate, both land and improved, has a broad-based marketplace with many and varied values, uses and users. Our country (including the real-estate-plentiful Valley) has a vast supply. The demand for real estate is there always, at some price or terms by users, investors or speculators.

Although real estate is not as liquid as a savings account, if you know your market place and a few techniques, real estate equities can quickly turn into cash or cash flows. Equities can be traded for other benefits. For me, real estate is the best investment opportunity around. Having owned land, apartment buildings, commercial properties and single family homes, my preference is the latter.

Of all the forms of real estate, the single family house seems to be the one with the most opportunities. It is the easiest to acquire and manage, and has the most liquidity. The small size of a single family transaction is well within the means of most investors. Unlike apartment buildings, a single family portfolio is not subject to a rent strike. There are ample opportunities for each of us who is willing to learn and to do. The key is "proper" acquisition.

Invest in a Home

If you're new to single family investing, look at one hundred homes for sale before you write your first offer. Drive around clean, neat and reasonably priced neighborhoods in your area. Where would you would feel comfortable owning a rental house? Jot down the addresses and telephone numbers of FSB's (For Sale By Owner). Knock on doors and ask questions of the owners. By taking the time to talk with a hundred sellers, you will learn the values in your market place and come to recognize a good deal. You'll become comfortable asking important questions about the property, the owners and their problems. Find out what the sellers would charge for rent. What are other properties renting for in the neighborhood? Talk with brokers about current sales and rentals. Become the most knowledgeable person in your chosen investment area of town.

Stick to your local area. Buying houses in other states and all over the country may impress your friends, but wait until you have a problem a thousand miles away! It can be a very expensive lesson. Let's assume you have taken the time to learn your market place, talked with one hundred owners and have decided to begin investing in single family houses. Where do you begin? Since we are in the "profit" business, the place to start is distress ownership situations. That' s where the profit is. You make your profit when you buy, not when you sell. With some effort you can find distressed properties. Eventually, owners will contact you. Now, you must do the locating. You need a system for finding, tracking and cataloguing opportunities. Mine works well and it's simple. I use 3x5 cards. Everyday I cut out the FSBO ads from the real estate section of my local paper. I paste each to its own card. I copy the ad phone number in the upper left hand corner and the date in the upper right corner. The property address (when I get it) goes in the top center. My cards are filed by the first three digits of the telephone number. I arrange all my 3x5 ad cards in order by telephone number, marked by tabs indicating which set of numbers follow.

For reprint and licensing requests for this article, CLICK HERE.

Prev