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Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work and competition among investors to purchase individual properties may be highly variable depending on knowledge of availability. During the acquisition of a property, an investor will typically make a formal offer to buy including payment of “earnest money” to the seller at the start of negotiation to reserve the investor’s rights to complete the transaction if price and terms can be satisfactorily negotiated. This earnest money may or may not be refundable, and is considered to be a signal of the seriousness of the investor’s intent to purchase.
Within the contingency period, the investor usually has the right to rescind the offer with no penalty and obtain a refund of earnest money deposits. Once contingencies have expired, rescinding the offer will usually require forfeiture of the earnest money deposits and may involve other penalties as well. Only rarely will real estate investors pay the entire amount of the purchase price of a property in cash. Hard money loans are usually short term loans where the lender charges a much higher interest rate because of the higher risk nature of the loan.
This minimizes the risk which comes from leverage, but also limits potential ROI. April 2012 by President Obama there has been an easing on investment solicitations. CAP rate, and is a common measure of the performance of an investment property. Some tax shelter benefits can be transferable, depending on the laws governing tax liability in the jurisdiction where the property is located. These can be sold to others for a cash return or other benefit.