The perfect real estate investment would earn you a significant profit in a relatively short period of time with little to no risk. But as you know, life is not perfect. If you’re thinking about real estate investing, here are three essential pieces of advice you should keep in mind.
Basic Rentals are a Good Place to Start
When you’re a real estate investing rookie, it’s tempting to go for the big guns. After all, doesn’t everyone want to be the owner of a gorgeous beachfront home that just screams romance? Sure! However, before you pull the trigger, it’s prudent to carefully evaluate whether your real estate investment will give you a fair cash return. Remember you will be moving liquid assets such as stocks, bonds, and time deposits into an immovable asset.
Consider starting out doing the sensible thing; invest in a rental property that will give you at least the same return as your financial assets.
Before you purchase, pay attention to the neighborhood, property taxes, and amenities in the area. Schools, crime rate and the local job market all have a bearing on rental values. Also, take a look at inventory.
The number of listings in an area can give you an indication of a thriving or decaying neighborhood, or if a “good” neighborhood just has a distressed property. Lastly, factor in upcoming new developments in the area that could affect rentals – and don’t forget to give due consideration to previous natural disasters in the region.
» MORE: More How to Find Distressed Properties
You Must Educate Yourself Before You Start Writing Checks
Would you attempt to fly an airplane with no prior training? You wouldn’t, right? So why would you treat investing thousands and thousands of dollars any differently?
Before you jump into the real estate investment world, familiarize yourself with real estate terminology. Also, invest some time reading practical guides about buying, selling, renting, and flipping real estate.
Be sure to obtain your information from multiple sources to get a well-rounded understanding of the space and always be wary of anyone who claims they can help you become a millionaire overnight.
Networking can also be very powerful, so consider joining a real estate investors club in your area to pick up valuable advice. Learn as much as you can and you’ll slowly but surely become a professional at picking winning properties in both commercial and residential real estate.
Always Treat Your Real Estate Investments Like a Business
There are “set it and forget it” investment opportunities out there. For example, perhaps you’ve been building up an IRA for several years; you transfer money in and the bank does the rest. Well, real estate investing is certainly not that simple. It’s a highly involved, high-risk, high reward business and treating it as such will make you more likely to succeed.
Before you dive in head first, work with mentors to develop a well thought out business plan that will help you yield smart investments. Set clearly defined, realistic goals for the short, medium and long term to keep yourself on track. You can maximize your returns, minimize your risk, and turn your real estate investments into a wealth-building tools if you put effort into planning out your venture.
Follow these tried and true real estate investor tips to increase your odds of building a flourishing real estate investing business!