If you are investing in real estate or are considering doing so, this story provides valuable lessons. This is not someone who is just beginning their foray into real estate investing or someone who is jumping on the foreclosure bandwagon. This comes from my own personal experience. As a real estate investor for 30 years, I've seen my fair share of real estate cycles, but nothing compares to what we're experiencing today. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essayRecently I had an investment property trade that I need to make in order to continue to defer the tax. With a standard 1031 exchange, you have 45 days to find a replacement property and 180 days to close. However, my exchange is not a typical 1031 exchange. This is an insurance payment on a property that was part of an older exchange. This property had a sinkhole and because of this the insurance company no longer wanted to insure the property and so reimbursed me at the fair market value of the property, which at the time was higher than it was. It's today. I paid off my loan with the proceeds and then resold the property "as is", full disclosure to a nice couple who probably never could have otherwise afforded to live in the community where the property was located. We finalized the transaction at a local attorney's office, as I did not want any mistakes in the sale of this property. For those of you who are not familiar with trading, since it was an insurance gain, you have more time to reinvest. If I don't reinvest the profit dollars and my basis from this insurance exchange, I have to pay taxes. Exchanges are tax-deferred until you stop making them. Then you owe the tax that accrued to your base on the original exchange. In other words, I should invest more money than I received from this insurance. Normally it wouldn't be that difficult to obtain another property. However, due to current market conditions, it's not just about finding the right property, but also securing the financing. In the current climate, financing is quite difficult with lenders not lending and high lending rates to investors. Even if you can get a loan, the number of foreclosures and short sales is overwhelming not only for lenders (who are at least two months behind), but also for us investors. Not to be discouraged, I decided to see how things really work in a market that I know and understand but have not invested in recently. I also thought I could find money from other “financial friends” if necessary. I have been a real estate investor for several years and have come across many resources in the industry, so I wasn't worried. With my strategy in place, I headed to Florida to do some real estate shopping. I know, some people go for the sun, but since Florida is on sale and I love shopping, I headed south. Before leaving for Florida, I looked at dozens of foreclosure sites, conducted cost of living studies; I researched education, arts, crime, and other statistics that I thought were necessary to identify communities where I might be interested in investing in real estate before leaving for Florida. I had 3 objectives for my real estate tour. He musthave cash flow The property must generate positive cash flow. If I put down 10%, how much will I earn each month to cover the 10% down payment? How long will it take me to get my money back? Is there enough positive cash flow to offset emergencies, vacancies or other surprises? I expect positive cash flow on my investment. Reinvest profits I needed to be able to reinvest profits from the exchange. Newer Communities My investment practice is being able to invest in newer, family-friendly communities where people want to live. Is there pride of belonging within the community? Are there amenities such as shops and schools nearby? Is the Interstate nearby but not right in the yard? I read with interest that Florida is for sale. Now I needed to see for myself if the sale looked like a promotional sale where the retailer advertises a sale but there really isn't a good deal, or are we talking SALE! Once I arrived in Florida and began my tour, I quickly learned one thing that every real estate investor, seasoned or not, should know. If you think you can buy property on the Internet from those fancy websites that offer instant quotes, among other bells and whistles, forget it! Under no circumstances should you try to buy anything from a site without having seen it. Even if you have a trusted person in an area you want to invest with confidence, but check. Get on the plane, the car, the bus and see for yourself what you buy or stay out of this market! I discovered that in overbuilt communities, tons of homes sit empty and property values ​​in the communities are well below 50% of the peak in 2007. I visited three communities during my trip; one area was so bad that I was convinced there were more empty houses than occupied ones! I also learned a few things about real estate in Florida that I didn't know before. Drywall Problems Everyone was talking about lawsuits from homeowners to builders and former owners of poorly constructed homes with drywall problems. Apparently some of the neighborhoods in the subdivisions I visited are facing environmental hazards due to drywall that hasn't been properly cured. So, not only do I need an inspection of the structure itself, but I also need an additional inspection for a new problem on homes built from 2004 to present. Over-speculation There is more than one reason why a property is for sale in Florida. Many areas I visited had properties that investors had purchased on speculation. Once turned upside down, these investors left the property. Entire communities are vacant as a result of poor decisions made by investors in the recent past and communities are now at various stages of completion. Personally, I am not interested in acquiring property in areas where no one wants to live. HOA Fees Many new communities have HOA covenants and fees (homeowners association fees) that are outrageous. In one community, I would have to pay almost $200 a month just to a community association, which would impact my cash flow. Additionally, if there are enough foreclosures, short sales, or other distressed properties, who pays the HOA dues on all of these problem properties and is the community able to keep up with the maintenance that these fees paid? I have.