Making money with real estate is like any other investment.  In order to make money, you must buy low and sell high.  That means that you must find a cheap property if you want to be guaranteed to make money.  Of course, you can also go the long-term route of buying a property and using rental income to pay off a mortgage, but this article deals more with buying inexpensive properties that can be sold for a profit.

When times are good and prices are rapidly increasing, you can make money with almost any property.  When the market is flatter, you have to be more careful about choosing a property.  Begin by doing your homework.  If you plan on investing in your city, then you should check the newspaper and online listings frequently.  After a few weeks you will have a general idea of prices.  If you take the time and effort to visit a few of these places, then you will get a better grip of what prices are good and which are too expensive.

It may take weeks or months, but sooner or later you will find a property that seems extraordinarily cheap.  By cheap, I don’t mean low in cost, but cheap in comparison to its value.  When you’ve found this property is when you strike.  Verify why the property is so inexpensive.  Is it because it has some sort of serious structural problem, a title discrepancy or a lien on the property?  Find out the owner’s motive in selling.  If the property is cheap, there is a reason.  If the property appears to be sound with no good reason for the low cost, then perhaps the owner has a motivation such as needing money quickly for other reasons.  This is how I made 35% on a property in just a couple of years.  The owner rented the house out and needed the equity because he was planning on buying another building that he had found and hoped to make a lot of money on.  Everything checked out fine and because the owner needed to sell quickly I bought at a price below-market.  All I had to do was wait a bit and I sold the property for a good gain.

There are other ways of find cheap properties, such as online and offline auctions.  Offline auctions, such as tax-defaulted properties can have a good number of low-priced bargains, but if they are well-publicized, chances are you won’t be able to make any decent money from them because too many bidders will show up.  Online auctions can yield good properties, but if the real estate is in a very populated area, chances are you won’t get a bargain.  Sometimes, though some of the more rural areas do have good bargains and they go unnoticed.

Keep in mind that finding a cheap property takes some time and effort.  Once you’ve found one, you might be tempted to jump on it immediately.  Keep in mind, it doesn’t matter how cheap the property is if the market you are buying into is very slow.  What good does it do you to make a small profit if it takes you three years to sell the house you’ve just bought?  The maintenance costs and property taxes will eat up most of your profits.  Try to find a market that is healthy, look for the cheap bargain, make sure it’s cheap for a good reason and make your move.

Written for Richbitchitch.com by Rick Hyland

Getting Started In Real Estate Series

Part 1: Finding Cheap Real Estate

Part 2: Investing in Real Estate Abroad

Part 3: Real Estate Auctions Part 1 of 2

Part 4: Real Estate Auctions Part 2 of 2

Part 5: Should I invest in residential or commercial real estate?