Tips For Real Estate Investors

Tips For Real Estate Investors

If you are considering investing in real estate, take a moment to review these tips from successful investors around the country. There are things that you can do to ensure your chances for success. These are great nuggets of advice from varying and interesting perspectives. Dig in…

Look At Emerging Neighborhoods | Properties in emerging neighborhoods offer growth potential and a possibility of tax incentives for buyers. Buyers investing in emerging neighborhoods can maximize their profits and ensure that their rental income will cover their costs. 

Do Not Over Rehab | Accents and fixtures in your investment properties do not need to be on par with Pottery Barn. They should look nice, but do not need the most expensive finishes. It is ok to have a budget and stick with it. It is ok to go with fixtures that are middle of the road quality.. 

Do Not Over Leverage Yourself | A good mix of properties that you own free and clear and others that are financed will help ensure that you do not over-stretch your resources. You need to protect your cash flow for times when you have vacancies for longer than anticipated. 

Single-family Rental Properties | Single-family homes have historically appreciated in value. A safe bet is to have some in your investment property portfolio. The current rental demand for single-family homes is high. 

Keep Up With Maintenance | Consider adding a bi-annual walkthrough into your lease agreements. This is to ask your tenant(s) if there is anything that they have noticed that needs to be repaired. Inspect around toilets and under sinks for water damage. Finding small problems before they become big problems will save you money.

Network | Find a real estate investing group that does not pitch products but works to educate and mentor you in areas that you are interested in. When you participate in these groups, we guarantee that you will get the most out of your experience. 

Become An Expert In Your Market | Be well informed on average rent, increases/decreases, trends, income averages, interest rates, employment rates, etc. If you know your current market, you can prepare, plan for the future, and be a more effective real estate investor.

Set Up A Budget | As a new investor, it is recommended that you set aside 50% more of your budget as reserves. Your budget almost always is more than you anticipated. One maintenance or repair issue can detect another, and project completion time can grow. 

It’s A Business | Your real estate investing is a business and as such, it requires purposeful management, planning, and execution. Regardless of how large or small you want your business to be, it needs to be run like a business. 

Count On Vacancies | Factor vacancies into the cost of carrying the property. You can do this by assuming that not all months in a year will produce an income. The average is 2%-10% loss in revenue. You should assess the property and your tenant(s) to factor in how much revenue loss you should expect in any given year. 

As Your Revenue Grows, Change Your Management Style | As the number of units that you own and manage grow, you may be able to hire a property manager. The fee  for outsourcing these services can be factored into your budget and profit-and-loss statements. If you manage the properties yourself, pay yourself. You will lower the tax owed on your revenue. It is also a reminder that your time is worth something.  

Know The Tax Laws | It’s critical to know how to file for the right deductions and taxes based on your state, county, and city. Did you know that the new tax code allows you to deduct personal property costs including furniture, and to benefit from reconfigured bonus depreciation rules. As your portfolio grows, you may want to look into a professional tax accountant. 

Have More Than One Exit Strategy | Flipping starter homes that are priced so they can be rented out for a positive cash flow allows you to build wealth, or sell quickly if things go wanky. You can mitigate your risk by purchasing properties that can be flipped or rented out. 

 Study Market Cycles | Many very successful investors research the market and purchase during recessions or early recovery phases of the real estate market. This garners significant appreciation, capital gains, and rental income. Focus on the next five years in your market. 

Look For Wholesalers And Negotiate | Find a network of property wholesalers when you are interested in purchasing. You can connect with them through social media. Never accept the first price from a wholesaler, negotiate for a lower price. They need to move homes fast. Offer a quick close for a discounted price.  

These strategies work whether your goal is to build a rental property portfolio, or to flip a few properties a year. We invite you to contact us to connect with a REALTOR® that can assist in your search for properties that suit your needs.

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