Monthly Archives: March 2017

5 Real Estate Investment Tips

There are countless tips on real estate investing available and this is by no means intended as a comprehensive list. While every investment has its own intricacies and problems that need to be worked out, there are some very basic aspects that are common to most investment properties. Understanding those aspects and asking questions about them can help you determine whether a particular real estate investment opportunity is for you.

Anything Can Change
Building in the capacity for change in your investment is not only good real estate advice, but good life advice. Aspects of an investment can change at any given time and building in a little cushion in your profit projections for that change will most likely give you a better outlook on the possible outcome of your investment.

This is especially true for something like the tax climate of your investment as changes in tax laws happen regularly. If the tax situation surrounding your investment is the only thing you like about it, it is probably not a sound investment. Solid investments can withstand changes in the tax code, so never rely solely on the stability of tax codes, you will be sorely disappointed.

Do What You Know
It is tempting to get involved in real estate investment opportunities outside of your comfort zone. Maybe the terms look good or the area is nice, but your lack of expertise in the field will ultimately hurt you over the course of the investment. If you are well versed in multi-family homes, do your best to uncover the best investment opportunities in that field. If your bag is fixer-uppers, stick with that. Success is difficult to replicate so if you have a knack for something, exploit that knack.

Compare, Compare, Compare
As any real estate agent will tell you, valuations for a new home put on the market are a direct reflection of other sale prices of similar properties in that area. Your potential investment is the same way. If you are going to rely on rents to make back the money spent on the investment, compare the rents your prospective investment property takes in against similar properties in the area. Are they too high? If so, that may indicate future trouble filling the building at those prices, which then cuts into your profit forecast.

If you are getting involved in a fixer-upper, compare what you think the home will be like in the future to homes that have sold that look similar to that now. Doing so will help you estimate your eventual sale price and the amount of money you should invest to net a decent return.

Hammer Down True Expenses
Just as you want to examine what your incoming cash flow will be on any real estate investment opportunity, you want to investigate your outgoing cash flow as well. What are the key costs involved in running the property? What are the taxes on the property? How much does it cost you when part of your multi-family property is vacant? Sometimes properties can look great when you examine the rent payments coming in but then lose their luster when you look at the cost of running the facility. You need to investigate both sides of the story to get an accurate view of the financial future of your investment.

Know The Building
In real estate investing, surprises are usually costly. Not only should you do a full walk through of the prospective investment yourself, you should also look in to hiring an independent, professional inspector as well. Uncovering problems with the foundation, roof or furnace early can either save you from making a poor investment or give you ammunition to negotiate a lower price.

Not all real estate investments are the same and you will likely run in to a unique problem on every property you pursue. However, by sticking to the tips here, you can give yourself a great foundation from which to operate. Above all, pursue information on the property as vigorously as possible to eliminate the possibility of regretting your investment later.

The Successful Investor: Not What You Think

While much has been done to crush the misconception, many still believe that to be a successful real estate investor, you must either have a lot of money or find some one-in-a-million opportunity. That is plainly not true and while it may certainly turn out that making money through investing comes easier as wealth increases, all wealth has to start somewhere and the real estate investing arena is no different.

In The Beginning
The biggest piece of advice any real estate investor can have when just starting out is to invest carefully. There will be many opportunities as you get deeper into the real estate investing field, but not all of them will set you on a path towards prolonged success. The most successful real estate investors deliberated carefully before picking an initial project, sometimes a hard thing to do when you make your mind up to get involved in real estate investing.

What ends up being the case here is that you will find a way to get involved in an investment without laying out your entire nest egg, though it will take some time. A common way to achieve that low-cost inroad is to partner with another investor on a particular property to get your feet wet and share the risk with another party. You may not see the huge windfall you’ve envisioned, but if you choose the right opportunity you will see enough to continue your investing career.

Save, Reinvest, Rinse, Repeat
Investing is a cycle and as you graduate from your first real estate investing experience, the best thing to do would be to put your earnings away in savings and then take a portion back out to reinvest in a new project. The best investors make a strict habit of saving at least a portion of the proceeds of every investment to gradually build up a fall-back reserve should an investment go horribly wrong.

You will find that most real estate investors make a serious commitment to saving and many never have a reason to stop doing so. While you will most likely run into a life event or investment hiccup that causes you to stop investing for a period of time, you will most likely see a rebound from that and begin again. Remember to save and reinvest your proceeds to continually benefit from your investments.

It Will Get Rocky
Very few real estate investors make it through an entire career without having some hardship and difficulty along the way. For most situations, successful investors will tell you that riding out the storm and waiting out a rough patch is the best way to combat a low market or other investment malady.

Markets, just like so many things in life, are cyclical and if your investment looks dour for a time, you would be well served to wait it out as prosperity is likely to return. That may seem a little touchy feely, but look at the stock market for inspiration. Though there will always be dips in the market, there is eventually a peak to offset that loss. Maintaining a similar outlook of patience on your real estate investments will likewise typically pay off in the end.

Though it may seem like only the wealthy get wealthier, getting involved in real estate investing does not have to be as daunting as it appears. Just getting a foothold in the investment arena with a small deal at the onset of your career is likely to eventually grow into bigger and bigger investments. Make certain that you save and remain level-headed as you go through your investment career and you will be able to speak from a position of authority when people ask you just how you did it.

Are You A Short Term Investor?

The world of real estate investing can certainly seem like a vast one full of many different types of projects and opportunities. That can certainly be true, but by asking yourself the key question of what kind of investor you want to be, you can cut through a lot of that material and focus on the activity that you will not only benefit most from, but will enjoy the most as well.

Asking yourself whether you are a short or long term real estate investor will go a long way towards determining the types of project you should spend your time pursuing and the kind of information you should be soaking up from as many sources as possible. For those that answer the question as short term, your primary purpose is to buy low and sell high, no matter how you get there. There are two main ways.

Put A Home Through Rehab
Perhaps the most common way to take a low-sale price home and convert it into a higher sale price home is through renovations on the property that add real value to the piece of real estate. You’ve no doubt heard of flipping homes or renovating homes and this is where those types of investors put their resources.

The draw for this type of investment just like any short-term investment is the prospect for a quick payoff. Indeed that can be the case but those pondering a pursuit of fixer-upper properties should keep in mind that it takes time and experience to get through a real estate transaction efficiently and first time real estate investors can be overwhelmed by the renovation experience.

The key goal here is to find properties that have the potential to sell for far more than their renovations might cost. That search is being done right now by hundreds of real estate investors in your area, so pinpointing the best opportunities can often be a difficult, competitive pursuit. It may be a good idea to partner up with a seasoned investor on a few transactions before setting out on your own to get the hang of renovations and the homes that are best suited for that kind of investment.

Find A Gem
Many real estate investors skip the renovation portion of the process all together and focus on properties that are undervalued on the market and could be resold almost immediately at a higher price. Obviously, these properties can be more difficult to find and the risk involved is usually higher because undervalued homes are usually undervalued for a reason.

One demographic that finds this type of investment particularly attractive is made up of committed real estate investors that also have a license to buy and sell real estate. One of the key barriers to reselling a home is the expense entailed in real estate commissions on both the purchase and sale of the property. For those that act as their own realtor, that cost goes away and the prospect of a profit increases greatly.

Short-term investments can certainly provide many benefits such as quick profits and the flexibility to quickly pursue other opportunities, but there will always be risks involved as well. If you want to get involved in renovating homes, make sure you do your homework and learn what to look for in a real estate candidate.

If hunting down undervalued homes is what you plan to do, think about pursuing a real estate license as well to cut down on the cost involved in the process. No matter what course you ultimately take, the key piece of advice is to become knowledgeable in the field before ever taking your first step. Real estate investors with the best foundation of understanding are more likely to build upon that and forge successful real estate investing careers.

Your Framework for Real Estate Investment Success

Every real estate investor has gone through the process of getting that first investment opportunity and then running with it to make a profit. While every situation is different and there are probably thousands of examples on initial investment deals, every investor has at least some part of an investment foundation they draw from.

For those that were born into families with a lot of investing experience, that foundation might have been instilled at a young age. For the aggressive investor that begins life in real estate early, perhaps an insatiable thirst for knowledge on the subject provided the basis for success. However, some kind of framework was established in every real estate investor, no matter how informal, and creating your own can be one of the best ways to give yourself a strong chance for investing success.

Create A Process
Having a standard set of steps that you take when reviewing a potential real estate investment opportunity can be a great way to standardize the procedure and give you hard results on the viability of a particular property. Probably chief among the things you want to consider is the rental history of the property. Often, clear trends can be seen over time and if the records on the property have been kept well, you can see what has and what has not affected rent payments over time. This can be a powerful piece of information.

Many investors use an Excel spread sheet or special program to keep track of all of the bits of information turned up regarding a particular property. With this level of organization, you can clearly set up different columns for expenses and revenues on the property to quickly get an idea of the viability of the property and what kind of risk level it might have.

Divide Into Internal, External Forces
In going through the financial data of a property, you will find that there is an almost endless series of bits of data that you will need to process to get to the bottom of a property’s financial health. Divide and conquer is perhaps the best way to get through all of that information and dividing based on external and internal forces is a good place to start.

Internal data refers to everything that speaks to the expenses and revenues seen by the property. The rental history will fall into this, as well any obligations for utility services, contract services like landscaping or snow removal and taxes that need to be factored into the cash flow on a particular property. As you go through the process, you will able to quickly put these bits of information into your spreadsheet or other software to quickly get a look at the internal financial state of the property.

When looking at external forces, you are more concerned about big picture type ideas, things that will impact the market of the area the property sits in. Are there new developments going up around the property? Has population migrated toward or away from the area? Has the per capita income of the area gone up or down over time?

These are all important questions to ask and while you won’t get hard data on one particular property, you will get a feel for the prospects of the area. This feel will leave you better equipped to gauge the risk level on a particular property and the likelihood that the market might dip in that area. While this will never be an exact science, it must go into the process to give you some background on the property.

As you set out to conquer the world of real estate investing, having a trusty model at your side to put investment opportunities through can save remove some of the hassle and stress from the situation. Whether you are a first-time investor or have a few deals under your belt, standardizing a process and giving yourself the proper investment framework to work from can mean a great deal of difference and hopefully, a great deal of profit.