Real Estate Investing
Summarize the business, financial, and technical risks of investing in single family and multifamily real estate. Explain the step-by-step process to purchase a property in California. Outline the best resources available for assessing a real estate deal, including a glossary of key terms.
- One prominent risk when investing in real estate is encountering problems with the property after purchase. Structural, foundational, and other problems may not be immediately apparent and may only arise after a deal is closed. To mitigate this risk, experts advise being thorough in due dilignce and inspections before purchasing a property.
- Rental properties come with their own set of risks, including problems with tenants and potential lawsuits. Vetting tenants thoroughly can help to mitigate this risk, as well as having proper insurance for your rental properties.
- Another risk is that the market will decline and the property will lose value. This is particularly concerning for short-term investments but less so for long-term investments.
- Liquidity is another factor to consider. Unlike some other assets, real estate cannot be liquidated quickly in an emergency. It can take months to sell a piece of real estate if necessary. However, owners are typically able to access some of the equity in the property if needed through a refinance or a home equity loan.
- California's real estate purchase process has some unique aspects. The state does not require the buyer and seller to ever meet in person. California also does not require buyers to hire an attorney. Buyers and sellers can be represented by a dual agent. California also has extensive and strict requirments that the seller disclose to property's physical condition to the buyer, so buyers can expect to receive a Seller's Disclosure Report.
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