Wednesday, July 05, 2017

5 Basic Tips for Investing in Real Estate

If you’re seriously considering a foray into income rental property investing, you’re certainly not alone. But you must proceed with caution and a significant amount of forethought. While no one has a crystal ball, it’s very important to make smart calculations going into the venture. To achieve the right results, you need to follow 
five basic tips for investing in real estate:

  1. 1. Pick the right property. Those who’ve been successful in this pursuit know one undisputable fact: money is made at the buy. In other words, what you pay ultimately determines if you’ll fetch a strong ROI or take a loss. There’s not much in between those two outcomes, but it does occasionally happen. If you aren’t purchasing it for a substantial steal, you’re on precarious ground to start.
  2. 2. Understand the local market. Another fact is the local market dictates what is and what isn’t a smart choice. Local markets are malleable, to say the least. Look into the history of the neighborhood and learn what trajectory it’s currently on, so you don’t wind up in a community that’s experiencing a decline.
  3. 3. Plan for the carry costs. Make no mistake about it, the amount of rent you can charge will be dictated by the condition of both the house and the neighborhood. And, many first time investors get into trouble by not factoring in carry costs. These include your mortgage, insurance, taxes, normal maintenance, repairs, vacancy periods, and replacement costs. After all, the water heater will break and the house won’t always have a tenant.
  4. 4. Get your finances prepared. While it’s obvious, it’s worth mentioning lenders treat rental properties quite different. These present a lot more risk in a number of ways. So, be prepared to put up a sizeable down payment and have money set aside for closing costs, as well as any improvements.
  5. 5. Create a solid tenant screening process. Unless you hire a reputable and reliable property management service, you’ll need to screen potential tenants. Learn about this process and take those lessons to heart.

Real estate investing can be very rewarding financially and emotionally. But, if not done right, can easily turn into a nightmare scenario. 

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