A – Good question. The process is basically the same, but there are different tax considerations and perhaps different things to look out for, especially if you intend to buy fixer-uppers and “flip” them. There are three major categories of real estate “investors” – 1) the flippers, who buy distressed properties, perhaps fix them up a bit (sometimes not even that) and then try to resell them at a higher price, usually fairly quickly; 2) the landlords, who primarily buy rental properties that they plan to hold onto for quite some time while they rent them out; and, 3) the speculators, who buy into new complexes at “pre-build” rates, speculating that by the time the unit(s) or house(s) are built that the market will have gone up and they will be able to sell at a profit.

If you are planning to take the flipper route, make sure you read the page on cautions about fixer-uppers. Also, to better understand the tax consequences read this article on flipping houses.  In the buyer’s market that Michigan has been in for the last 2 years, it is also important to understand how to flip houses in a down market.

The landlord investor might engage in a Starker Exchange (also known as a 1031 Exchange) and may want to read a few articles about that, including what the impact is on your heirs if they inherit a Starker Exchange property. A landlord-type investor might also consider buying commercial real estate as a safer investment, but only after you understand the differences in that market. In any event, you should understand the areas to beware of as a landlord.  Another thing to be cautious about are some of the “Great investment ideas” that you may be able to imagine – make sure that they are not illegal.  Also, you’ll need to get used to keeping up on the laws that govern landlords.

Speculative investors should understand the rules of that game before playing. Speculators should also be very careful about using piggy-back loans to achieve 100% financing. They can come back to bite you. Investors buying vacant land, especially waterfront properties should be extra cautious and should investigate thoroughly.

All three categories of real estate investors might benefit from reading this article on evaluating the risks of a potential real estate investment. The best general advice would be to read a book or two on the topic. Pay particular attention to the factors that dramatically change the numbers involved when you’re dealing with investment properties, such as the tax differences (investment properties would be non-homesteaded properties) and the insurance implications. Those two factors alone can tilt what looks initially like a good investment into the red. Maintenance costs and the planned vacancy rate (or occupancy rate, if you want to look at it from the other angle) are also critical when you “run the numbers” to see if an investment makes sense. Here’s a good article on understanding how much “leverage” you can stand to take on when investing in real estate. Another thing to remember is what you’ll need at the end of the year for tax purposes. Here’s a good article on that.

Be cautious about the seminars and TV ads that you see about real estate investing, especially those that promise to make you a millionaire in just months by investing with no money down in real estate. The only people making money off of most of those programs  are the people selling the “get rich quick” schemes.  

For more advice and pointers to information, visit Creative Real Estate Online or the REIclub site. For commercial investing visit the National Real Estate Investor site. To understand how you might go about investing in real estate without investing in real estate, read this article. In 2008, some PMI companies changed their policies about investment properties and that might impact your plans.

Also be aware that the IRS does monitor those Starker exchanges to see if you are playing by the rules.

If you’re considering delving into the world of foreclosures, in hopes of finding bargains there; perhaps you should read this article on the special dangers that lurk in that realm.

If you are determined to test the foreclosure market, here are a couple of starting point sites -

Ourforeclosurehomes.com - a Real Estate One site that is focused upon local foreclosed homes.