Investors can profit from real estate but it takes planning, expertise, and focus on being successful in a challenging property market. Becoming a successful investor is a step towards achieving financial freedom but you need to take care to avoid the mistakes that could make you bankrupt rather than realizing your dreams. You need to know how to minimize your risks and maximize your opportunities. Here are some secrets to help you succeed.
Make a business plan
Investing in real estate requires having a business plan. Your business plan should include the estimated outlays and inflow of cash from rentals, how many units to own, when to upgrade them, demographic changes, and all the other factors that could impact your investment over time. A business plan helps you to stay on track, visualize the big picture and focus on important goals.
If you have anything from a few to numerous rental properties, using property management services can be a wise investment. Using a specialized property management company in Atlanta or other U.S. cities, based on location, helps you to manage all your properties in a way that delivers a steady and reliable return on your investment. Top companies like Evernest, Mynd, and NestEgg provide smooth and hassle-free property management services so you can focus on investment decisions.
Know the market
Investors in real estate need to have an in-depth knowledge of the property market. Every market is different and investors need to go for markets that are in the expansion phase where sales and prices are rising, affordability is good, capital investment is going up, and construction costs are low. Developing neighborhoods with low crime rates, good schools, and access to parks, public transportation, medical care, and other amenities are in high demand.
If investors in real estate take the time to develop a deep understanding of a specific niche, it can be integral to their long-term success. For example, you may decide to focus on low-income multi-housing or high-end residential housing. You may find your niche in the new construction sector and develop relationships with builders so they know who you are.
Staying current requires an awareness of all the latest laws, regulations, and trends in the area. Those who fall behind can lose their momentum and also expose themselves to ignoring or breaking laws which can have legal implications. If you’re aware of all the current laws, you will make decisions that reduce your risks. You won’t turn the basement into a second rental unit until you know whether it’s allowed or risk doing certain work without a permit. Being able to predict when current trends are likely to change, such as consumer spending habits or mortgage rates, can create opportunities for you.
Knowing the market also means being attuned to the risks of certain deals and all the legal implications. For example, owning rental property in an area dependent on one economic driver can be risky. When that driver is no longer there and there are more houses than people who want them, the law of supply-and-demand drives prices down.
If you have a large cash reserve, you reduce the risks of having to sell a property fast at a loss and have more money for unexpected repairs. Managing risks in the correct way can significantly improve your chances of success, whether it means avoiding a fixer-upper that’s bound to be a money hole or improving your cash position before buying it.
Understand your costs upfront
You don’t need to just factor in the property cost and realtor commissions. You will also have to accurately estimate your repair costs, such as fixing electrical problems or addressing pest infestations. Most DIY work can detract from the value of a house and if you try to fix electrical or plumbing issues on your own, it may not be up to code. If you do renovations, you must choose those that will make the property more appealing to prospective buyers. You also have to budget for closing costs, insurance, and utility costs.
A real estate investor’s yearly expenses include a fair amount of taxes and understanding all the current tax laws can take time and effort. Retaining the services of a qualified, reputable accountant to handle your books can be cost-effective due to the savings such a professional can bring to your business.
Build a network
Good real estate investors realize the importance of building a network of business partners, clients, mentors, etc. A professional network can provide important support and offer access to new opportunities. Much of being successful in investing in real estate relies on experiential learning that access to a network of experienced professionals can offer. You can benefit from the wealth of knowledge, such as having access to a mentor you can bounce things off when making important decisions.