If you invest wisely, you will see stable, long-term profit that increases over time. Yet, real estate investment is not for the faint of heart—or the empty of pocket. Risks and upfront costs are high.
Here are 6 secrets of real estate investment to help you navigate towards a bright financial future:
Wondering how much you should invest in a property?
Examine properties of similar size and style in your neighborhood of interest. If any properties have sold recently, you can use their sale price as an estimate of how much you should pay. If other properties are renting, you can use their rent as an estimate for how much you should expect to get payed. Also keep an eye out for pages crowded with rental advertisements or advertisements that speak desperation. If other rental properties are struggling, the market may not support you adding yourself to the fray.
Property taxes can be quite a chunk of change, and you can’t assume that the taxes you pay on the property will be the same as the taxes the previous owner paid. Get an estimate from the county assessor to make sure you know how much to set aside for taxes. Consult a tax advisor to make sure you are getting every possible deduction.
Another hefty expense of property ownership is insurance. Make sure you shop around with quotes from several agencies before committing to one, and make sure you cover all your bases (tornado, flood, theft, etc).
You can outsource many parts of your property hunt to a real estate agent, but when it comes time for a property inspection, make sure you are present. Being on-site allows you to get more detailed information from the inspector about any problems he or she sees. Inspectors are often prohibited from quoting repair expenses on their official inspection report, but that doesn’t mean they can’t give you a hint of the repair costs on site. You will also have the opportunity to ask any nagging questions you have, which may or may not come up in the inspection report.
The more knowledgeable you are about a property, the better your chances on capitalizing on all of its selling points and minimizing its flaws. Your authority will also inspire the confidence of potential buyers or tenants. Possible niche markets are fixer-uppers, small apartment building, duplexes, condominiums, etc.
For most real estate investments, the money you make comes from the tenants in your home—and sometimes, the expenses you have to pay come from the damage a tenant does to your home.
Know what kind of tenant would be interested in your home so that you can market effectively. Do you own a duplex in a college town? A single-family home in suburbia? Market accordingly.
Screen tenants carefully before you sign a lease. Make sure their credit scores are high, meaning that they are more likely to pay rent on time month after month. Make sure they don’t have any felonies in the past. Also make sure you meet your tenants in person. If your senses start tingling, back out before it’s too late!
And the ultimate secret of real estate investment? Work smarter, not harder. Always take the time to educate yourself before you invest. When you go in to an investment situation with a savvy mind, you will come out with a fat pocket.