Investing in real estate is both exciting and challenging, and you can certainly make some decent money in the process. However, many investors make mistakes that keep them from realizing their potential. The following 10 tips from guest blogger Patrick Rogers should help…
1. Set Specific Goals
All too often, investors (or aspiring investors) do not have genuine goals. “I want to buy my first investment property” is not a true, actionable goal. On the other hand, “I want to buy an investment property that gets me €300 in profit a month,” is a goal you can work toward. Here is another example of a goal: “I want to buy a triplex for no more than €200,000, live in one space, and rent the other two out for €3,000 a month combined.”
2. Use Property Management Companies
In general, property management companies more than earn their keep. They take care of legal matters and help you find a higher caliber of tenants, and they also enable you to invest from anywhere. With a property management company, getting in on the action is easy, even if you live far from where you want to invest.
3. Review Your Mistakes
You will likely make mistakes as you go about real estate investment. Perhaps you bought an office building but have discovered that tenants do not stay more than one year. Work to figure out why, so you can address these issues and avoid making similar errors in the future.
4. Do Your Homework
Diligent research can help you avoid many mistakes. Without research, for example, you may never have discovered that an office building you love has an average tenant retention rate of one year, when you prefer it to be at least two years. The good news is that if you are using a property management company, much of your homework is already done for you.
Diversification, no matter the market, serves the main purpose of protecting investors against potentially devastating losses. In real estate, diversification comes in several forms: investing in international markets and those in your state; investing in both big-city and small-town properties; and investing in shopping malls, apartment buildings, office spaces and rental houses instead of just apartment buildings.
Of course, it may take time before you are in a place where you have the money and means to diversify.
6. Practise Patience
Real estate is not a get-rich-quick scheme, and the most successful investors tend to have honed their patience and aptitude for hard work over time. Aim to take calculated risks, not “crazy” risks.
7. Choose a Team
Do not plan to work alone if you want to be successful in real estate. Along with property managers, you may want a lawyer, a contractor, a tax adviser and a loan adviser, among other professionals.
8. Start Small
Starting small lets you gain experience while minimizing risk. One way is to purchase, for example, a triplex or fourplex, live in one part and rent out the others.
One approach to realize substantial profits is to buy properties in need of renovation. Do the maths first; however, odds are good that buying for less and doing renovations nets you more money than if you bought a full-price property.
10. Follow the 1 percent Rule
Speaking of maths, the 1 percent rule can help. Suppose you want to buy a house that does not need to be renovated for €100,000; the rule indicates that your income from it every month needs to be at least €1,000.
The 10 tips above should help beginning and seasoned investors alike. If you find that investing in real estate has become a drain on your time and you are no longer passionate about it, enlist the help of a property management company and regain your freedom.
Posted by: LucasFox.com