home-buyersOpportunities abound in a down housing market. The recent spate of foreclosures has home buyers and real estate investors in a tizzy. People with the right amount of capital are greedily eyeing the low prices produced by the catastrophic explosion of the housing bubble in 2007. Buy low sell high is the most important rule of investing, after all…right? Well, not always. As you might expect, real estate is more complicated than people make it out to be. All-time low prices in the American housing market certainly presents some opportunities for the savvy investor, but there many pitfalls as well. Before jumping into any real estate deal that you don’t fully understand, consider these three important real estate myths.

Real estate always appreciates

So much for this old wives’ tale. The great recession brought real estate prices crashing to the ground from historic – and unsustainable – highs in the late 90’s and early 2000’s. The result: a predictable rash of foreclosures, a significant dip in home ownership and the destruction of more than a few investment portfolios. Even choice Manhattan real estate, thought to be surest thing next to United States Treasury Notes, tanked with the flailing market. Real estate, like any other type of investment, includes risk, and when you take a risk there’s a chance that you’re going to get burned.

Foreclosures make great investments

Wrong. Foreclosures make very dangerous investments. If you want to invest in foreclosures you have to follow the same rules and guidelines that you would investing in any other property, and there’s still the chance that you’re going to lose out. Foreclosures might seem alluring to the inexperienced investor, but you have to do your homework if you want a good return on this speculative choice.

The purchase price is my only cost

If only this were true. The purchase price is just one cost among many that come with the process of buying real estate. Expect to pay legal fees, closing costs, maintenance and broker fees along with whatever purchase price you agree on with the seller. When all is said and done, most home buyers end up paying 30% more than the purchase price at closing.

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