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Great investment property deals in short supply

Savvy investors know when to hold 'em. They also know when to walk away and know when to run.

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The best advice: You've got to count your money.

That's what Richmond, Va.-based real estate agent Apryl Kay advises all of her investor clients.

Being aware of just how much an investment in real property will cost is even more important now with prices at record highs -- thus making investing more of a risk and less of the sure bet it has been in the last couple of years.

Kay, who has bought, sold and rented property in Texas and in Virginia for her personal investment portfolio for 16 years, has professionally helped others do so since 2002.

Investors must count money going out and hope it is offset by the money they hope to bring in, Kay says. This includes knowing not only the loan's interest rate, but being able to estimate taxes, insurance, utilities, maintenance, advertising for tenants and other business costs. If the plan is to hold on to the property as a rental, investors should also know how much they can charge for rent in the area.

Keep on walking
"You need to do research," says Kay, a top-selling agent with Napier Realtors ERA. "If the numbers don't work, walk away."

One of Kay's clients has done just that -- several times.

"We've looked at about 30 homes since Christmas,'' Kay says. Since then, they've put in eight offers. Most were rejected because Kay's buyer offered below the asking price, trying to make the numbers work.

Because of higher prices in the Richmond area, it has taken them some time to find an acceptable investment for the client. But their persistence paid off. Now, after months of shopping, Kay and her client think they've finally found their deal -- actually three deals. Her client has contracts pending on three single-family homes.

Kay says it is harder to find an investment property that will allow the buyer to charge enough rent to cover the mortgage or even fix it up to sell it for a profit. People who bought before the run-up on housing prices had more options, less competition and more room for profit. With housing appreciating so quickly in recent years, investing in real estate appeared to be a no-brainer, which made the market tempting to neophytes.

"We've gotten so spoiled," Kay says. "The investment property market hasn't replenished yet. The supply is just not there like it used to be prior to the housing boom."

But Kay says her investor clients only dive in if they determine it makes good financial sense. "Some investors get emotionally involved,'' Kay says. "This is business."

And it's a business more and more people want to get into.

In 2005, more than a quarter of all homes purchased were bought as investments, according to the National Association of Realtors. And, even as prices continued on their upward trajectory, sales increased. Last year, there were 2.32 million investment-property sales, up nearly 16 percent over sales in 2004.

 
 
Next: "... the overall housing market is slowing a little bit."
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