For starters, you need to understand a very basic principle when it comes to becoming a millionaire of any stripe.  You must earn money while cutting spending.  This sounds pretty self-explanatory, right?  And yet, many people make investment choices that go against this basic rule, that are more gamble than premeditated plan.  However, as long as you keep this tenet in mind when doing any real estate deal, you’ll have a much better chance of coming out ahead.  Now let’s get to some of the strategy involved in making money in real estate.

As mentioned, flipping is out these days.  You can no longer buy a house, fix it up, and expect to sell it before you make your first mortgage payment.  So you have to be prepared to hang onto (and pay for) any piece of property that you purchase indefinitely.  Of course, there are ways to cut or even negate your payments, and rental properties are the best.  With many people cutting back, bailing on home loans, and looking for less expensive living arrangements, well-appointed rental properties in desirable neighborhoods (good schools, low crime, etc.) are doing quite well.  This is a great way to pay for the mortgage without spending a dime (and potentially earn some passive income, as well).  Of course, you could also take on partners to dispel some costs.

But before you even think about buying a property, there are a few things you should do.  First, you should strongly consider taking classes and getting a real estate license.  It is important to have a solid understanding of what you’re doing before you start signing up for loans.  And if you have an RE license you won’t have to pay a realtor for the services that you can now perform on your own.  From there you’ll want to become familiar with the real estate market you’re buying in, housing market cycles, and the ins and outs of the lending process.  If, for example, you want to purchase in a certain area that is rather well-to-do, but you also want to try to secure an FHA loan, it behooves you to understand going in that FHA loan rates and limits could derail your plans.

The idea here is to do some legwork at the outset so that you can shop smarter when it comes to real estate investments.  If you take the steps necessary to become educated and then take your time finding the right properties, there’s no reason you can’t cut costs, earn more, and ultimately reach your goal of becoming a millionaire.  And with the housing market incredibly low, you only stand to gain if you play it smart with your purchases.

1. Nicaragua.  Believe it or not, the Central American country has come a long way in the last couple of decades, cleaning up the drug problems that permeated the world news to create a place that is safe, comfortable, and looking to take in retirees.  As of last year, they implemented a foreign retiree residency program to help international retirees make Nicaragua their home away from home.  Housing prices are realistic (even for beachfront property), the cost of living is low, and the government encourages small business.  For the person looking to retire in style, Nicaragua has a lot to offer.
2. Malaysia.  Although Thailand also has a lot to offer foreigners looking to retire (with low prices on everything from housing to food to services), Malaysia goes the extra mile by making it extremely easy for retirees to gain legal residency status, something that many Asian nations are not too keen to offer.
3. The south of France.  Although Paris is not the cheapest place in the world to retire (not by a long shot), there are regions in France, especially in the scenic southern portion, where retirement on a budget is possible.  Whereas you can expect to pay upwards of $2,000 a month for an apartment in Paris, you could buy a house in southern France for less than $100,000 (a lot less, in some cases).  You will also enjoy the laid back atmosphere of rural living, tons of outdoor activities, and of course, incredible health care, which is not only offered to citizens, but foreign retirees, as well.
4. Florida.  It may be cliché, but if you’re looking to retire in the U.S. you could do worse than the southernmost continental state.  The weather is undeniably hot and humid throughout much of the year, but you won’t ever have to deal with cold winter storms again.  And the fact that there is no state income tax is a bonus if you plan to use your extra time to start your own business.
5. Right where you are.  You don’t need a regional directory to tell you that the place you currently reside is awesome!  If you own a home and you can afford to continue living there (even on a truncated retirement income) then there’s really no reason to uproot your entire life (especially since this is a terrible time to sell a home).  Remain close to friends, family, and an area that you are intimately familiar with.  If you’re content, there’s no reason to move upon retirement.

• Home prices are not declining as quickly.  In recent months, they’ve either remained steady, gone up a little, or seen only a slight drop as opposed to the common major falls of the past.  This is a good sign that consumers are purchasing homes again, rolling money back into the market.
• At the same time, home prices have not witnessed a huge increase.  This side is even better for the consumer; it has become easier for many people to afford homes.  While rising unemployment rates threaten the affordability from the other side (and keep the possibility of foreclosures near), the fact that prices have remained relatively steady offer a positive promise for the real estate future.
• With prices low, the people that can afford to buy homes are actually buying them.  One big help has been the first-time homebuyer tax credit.  People that are buying their first home can receive up to an $8000 tax credit that does not have to be repaid.  If you are in the market for a new home (excuse the pun), do not forget to take advantage of this!  It’s only available through December 1, 2009.
• Even though credit requirements have become stricter due to the high number of recent foreclosures, interest rates have remained low.  This equates to more affordable loans for new homebuyers, as well as a great opportunity for many people to refinance their current homes.
• Foreclosures are still common.  This may seem like an oxymoron; yes, foreclosures are a negative occurrence for all involved parties.  However, foreclosures mean even lower home prices, opening up the possibility of homeownership for even more people.  These properties account for about 1/3 of home sales.  Without the low prices that come with them, home sales would not be rising.  Of course, low foreclosures would be a better sign of recovery, but for now, the fact that it equals a low price and a home sale stands to push the market in the right overall direction.

These indicators may be only small glimmers of hope that the recession will end, but a positive outlook is always beneficial.  If these signs can become a solid base to build upon, perhaps we can eliminate the words “slump” and “downturn” from our vocabulary.

A foreclosed home presents a great opportunity.  The previous owner was unfortunately unable to keep up on the mortgage, leaving it available for you at a considerably lower cost.  You have three different windows of time to attempt to purchase a foreclosed home, and depending on your level of homeownership experience and any advisors you have available to help you, one option will work better than the other two for you.

Pre-Foreclosure

Pre-foreclosure may offer the best chance for the greatest price discount, but it’s also the toughest time to get your offer noticed and accepted.  In this case, you would be dealing directly with the current owner, attempting to help them ease through the foreclosure process with a buyer on board and hang onto the equity that has been built into the home.

The problem is that the owner is experiencing a rough financial and emotional time—it’s unlikely they’ll want to talk to yet another person that wants to take their home away from them.  They may be desperately searching for a way to keep the home, or simply too angry and frustrated to be bothered by you.

If you do manage to get an offer in, know that you’ll be competing with experienced investors that typically buy foreclosed homes in order to fix them up and resell them for a profit.  If you’ve done all your research and have the right help, don’t be afraid to hop in.  If you’re buying your first home or are even a little unsure of your negotiating skills, you should stay away from this period.

Auction

Inexperienced homeowners may also want to avoid auction.  The main issue here is that you’re taking a big risk.  You need to make sure you are aware of the home’s true value, and that can be tough—you’re not allowed to inspect the home before you buy it.  You must pay the full price in cash, and you accept the home in as-is condition along with any judgments or liens currently held on it.

Again, if your research determines that you can get the best price on a particular home during auction, you’re encouraged to do so.  If you’re not already fully experienced with foreclosures, make sure you consult with an agent who can guide you through the process.

After Foreclosure

This can be the best option for first-time homebuyers; the process is the most similar to buying a regular home.  The price will still be discounted, and you may even have some wiggle room for negotiation yet since the bank is the new owner and it is hoping to sell the home as quickly as possible.  You can mortgage the house now through the bank, and all of those nasty liens and judgments have been removed.  Be aware of the need for some home repairs, though.  Generally, if the previous homeowners were unable to meet their monthly payments, chances are high that necessary repairs were neglected due to financial reasons.

On a final note, be sure to dig deep to find the right foreclosed home.  If you’re a first-time homebuyer scared away from pre-foreclosure and auction purchases, you may want to search for hidden foreclosures.  A perfect example is a new home that was in the process of being built (not necessarily by the home’s intended owner), may or may not have been fully completed before the loan money was spent, and there weren’t any buyers.  These may not be listed as foreclosures, but they can be found and purchased at discounted prices just to get them off the market.

Rural real estate seems to be a hot trend for investors, but is it really a good investment?

The thought behind buying rural real estate seems to be there is only so much land, and therefore the value can only go up in price. By buying a quiet property out in the middle of nowhere, you can live peacefully and possibly earn a nice return on your dollar if suburbia expands.

Unfortunately it seems many people are duped into buying rural land and end up stuck with a piece of property that is virtually worthless. Take Paula, who shared her biggest financial mistake. Paula and her husband were newlyweds invited to enjoy a nice vacation and take a look at some land in Colorado. The hosts got them excited about the opportunity to make money as a “soon to be ski resorts” was in the works, and they took a gamble and bought the rural real estate. It’s now 10 years later, and they are still trying to pay off the land they can’t even build on.

There are countless other stories just like this where couples go on a vacation and find a nice quiet lot with a for sale sign and think how wonderful it would be to get away from the busy life. Only after they buy their rural piece of land do they find out they over paid for property that is essentially worthless.

If you are going to buy rural land as an investment, don’t do it on a weekend binge, and make sure you do your own due diligence. There are certain things that you have to take into consideration that may not even cross the suburbanite’s mind, such as:

• Is there a well for water?
• Is the property accessible during the spring when it rains, or does the land around the property flood?
• Does it have public access to sewage, septic, electricity and roads?
• Will the public school bus come out there?
• Is the land suitable to build on, or is the ground too soft?
• What will it cost to get the phone company to come out there, and is there any way to get internet access?
• What kind of wildlife will you have to ward off?
• Are the boundaries clearly defined?

If you think you are getting a great deal on an inexpensive piece of rural real estate, check with the city on the items listed above. Generally speaking, the farther away you are from civilization, the more expensive it will be to build and have these services brought out to your property. There’s a good chance your great deal might have been someone else’s headache.

Millionaire Money Habit: With any kind of investment you make, it is critical that you do your own due diligence and fully understand what you are getting into. Don’t buy something with your hard-earned money on emotion. Take your time, sleep on it and make sure everything checks out. “Opportunities of a lifetime” can end up being your biggest nightmare.