From Dave Wilke (“Wilke and Associates”)

1. HAVE A BUSINESS PLAN – As is the case with any business, you need to plan your strategy for real estate investing. One of the big aspects you’ll need to look at is the reason that you’re making the investment in the first place. Do you want to buy a property and hold it for a few years? Do you intend to buy it to fix it up a bit? Do you want to “flip it” and sell it right away for a quick profit? Knowing what you want to do is key for “moving the ball forward” towards the goal of successful real estate investment.

2. CHOOSE AN ENTITY – Once you establish your business plan and your reason for investing, you’ll need to analyze that reason to determine at which entity your business will classify. If you want to buy and hold for awhile, you may be better off as an LLC, which is better suited to handling potential loss. If you want to “flip” the investments, an S-Corp may be better for you.

3. KNOW TAX IMPACTS – Knowing what tax implications could result from your investments just may save you large amounts of money in the long run. Do you get deductions for maintaining a rental property, such as a beach house? Should you buy a certain property right now, or should you wait a few months, and risk falling out of a time period where you could get some money back on next year’s return? Be sure to consult a CPA to discuss the possible tax impacts of real investment. You never know how much money you might be missing out on!

4. KNOW YOURSELF – Sound familiar? Ron Morris’s Number One “Immutable” holds true in real estate investment. Knowing your personal strengths and weaknesses are essential to being able to invest within your limits. Don’t invest in too many properties, if you’re not prepared to make the personal investment in each one.

5. MAINTAIN THREE CASH BACKUPS - Make sure that you have a solid financial foundation before you take this significant financial plunge. Anybody who even THINKS about real estate investment should have a solid reserve in personal savings, a healthy credit line, and a significant amount of hard money, be it either through 401K plans, or friends and family who may be able to help you out in a pinch.

6. ESTABLISH A PERSONAL FINANCIAL STATEMENT – When you take a “big picture” look at your financial portfolio, make sure you’re very well diversified. Real estate may be the heavy hitter for your portfolio, but make sure that portfolio is well rounded with stocks and bonds, in case the real estate falls through.

7. DEFINE AVAILABLE TIME – Perhaps more than any other form of investment, real estate investing takes up an enormous amount of time. If you’re into “hands-on” types of real-estate investments, you’ll be spending plenty of time fixing up a house or researching each property on your “shopping list”. Real estate properties are significant investments, and devoting an insufficient amount of time to them could prove to be quite costly in the long run! (Bottom line: If you don’t have the time, you better have the money!)

8. HAVE A MENTOR – This holds true, especially for the first real estate property in which you will invest. Have somebody close by who has been in the trenches and can give you advice as to what to look for when you make that initial leap into the world of real estate!

Wilke and Associates’ “Ask the Accountant” segment can be heard on The American Entrepreneur at 9:15 (right after Ron’s rant). Wilke and Associates can be reached at (412) 278-2200, or on the web at www.wilkecpa.com.