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    Determining Your Operating Expenses.

    Before you part with your hard-earned cash or sign any contract it's a good idea to find out what your operating expenses will be. There are 'hidden' costs to all real estate investments. They are not really hidden but if you are a novice there are some costs you might not be aware of. If you don't find out about them, any costing you do will not show a true picture of your finances. And you won't be able to determine your operating costs.

    - Taxes: Taxes must be paid. Make sure you know where and when.

    - Fees: Fees can encompass a great many costs. There are attorney's fees and Title search fees to name two.

    - Closing costs: There is a closing cost for every loan that will vary with the amount you have borrowed.

    - Interest rates: Of course you will get the best interest rates on your loan that you can. Some are very reasonable, but they still have to be paid.

    - Liens: You'll need to study the public records to determine if there are any liens put on the property. Basically, these are claims for money by unpaid creditors, but the main one will be the amount still owing on the property.

    Before you invest, you will have to decide on whether you want to use cash or credit for your purchase. Many people don't realise that money has a time value due to inflation, so even though real estate value may increase, a purchase using all cash may not be feasible economically, because your cash could be used in a more effective way.

    If you buy a house for $100,000 cash and it increased in value over 1 year by 10% per annum, that would not be all profit since you must pay for the cost of the transaction. But if you had used just $10,000 of your own cash and borrowed $90,000, that 10% increase would still get you 10% return, but your return on cash is now 100% ($10,000 yields $20,00 equity). Remember that borrowed money is not free; you'll have loan costs and interest to consider. However, you could rent the house to pay for that.

    Unless you have a good grasp of the basics of finance and investment, it's wise to get the advice of a trusted real estate attorney or financier. Here are five investment pointers to consider.

    - Realize that what happened in yesterday's market won't necessarily happen tomorrow.
    - Buying a rental for full market price with a break-even or negative cash flow is a recipe for disaster.
    - Invest in knowledge before property, then you won't be scammed.
    - Keep sufficient funds in store to meet repairs and debts.
    - Treat real estate investments as a proper business.
    - Don't be too greedy.

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