It’s not a secret that there is a lot of money to earn when investing in a real estate business. But that involves a lot of hard work of course. Here are some tips how to invest successfully in real estate:
- Know your market.
The success of your purchase largely depends on the specific real estate market of your choice and its activities. The first thing you need to remember is to avoid overly hot markets because the risk is just too high and you may end up losing money.
Real estate markets have different phases and cycles. Invest in a market that is in the phase of expansion—where there is balance in the rising of sales and prices versus affordability, construction is low and capital investment is high.
You should also focus on the location of the property and invest more in areas with dense population, accessibility to basic amenities, family and child friendly community, and development is apparent.
- Spend wisely.
The return on investment is what matters most especially when you invest in affordable real estate properties. Low income neighborhoods tend to not get affected much by economic downturns compared to others which somehow provides you a guarantee to some sort of stability when you invest in low-cost properties. Moreover, tenants in these types of rentals are unlikely to move frequently because of high fees. So once they find something that they can afford, they tend to stay for longer contributing to the stability of low rental properties.
But you also need to consider the safety of the neighborhood like the crime rate, types of tenants, and other factors that will affect your return on investments.
- Foresee the costs.
When investing in a real estate property, it is important that you foresee the costs upfront, not just the costs of the property and commissions but also the costs of repairs. Unless you are capable of doing DIY repairs, do not try fixing things, messing it up, and result in losing money instead. Also do not make unnecessary renovations that do not appeal to the type of community your property is located.
- Manage the risks.
It is not wise to go deeply into debt. Before buying a house or any investment property, make sure to have a large cash reserve. You should be able to at least pay a down payment of 10% or much better make it 20%, because it will lead to lower interest rates on the loan and it cancels the private mortgage insurance. In the long run, if you have a huge cash reserve, you reduce the risk of selling your property fast to an unfavorable deal because of cash loss.
While relying on a hard money lender for a fast cash loan to fix last property repairs is helpful, they tend to have high interest rates and end up eating your supposed profit margin.
- Don’t fall in love with the property.
Wanting your investment property in a working-class location to be the best and end up turning it into a luxury property won’t guarantee it to be sold in the same pricing with those in the upscale area. Do not fall in love with it too much, because you are not going to live there. You will only end up losing money in overbuilding.
Fix what is broken and decorate practically—not expensively.
- Go extra!
Maximize your investment property and make income generating additions. For example, letting a bank rent and install an ATM in a corner or an extra space in the lobby for a small convenient store which rent fees add to the business cash flow.
You can also hire a caretaker, or a security guard, which adds value to your property and makes it more attractive. With that, you can ask for higher rent and the tenants will be fine with it.
The other thing you can do is fill the property with a tenant instead of house flipping. Once the tenant has moved in, you can then start looking for buyers—that’s called turnkey rental property which usually sells easily to new investors.
- Familiarize with the local rules.
Before you start doing anything in your investment property, make sure it is within local rules and regulations. You have to be aware which works require getting a permit or not.
Real estate investment is not limited to single-family homes or apartment rental buildings. You can explore and invest in other types of properties like office spaces, storage units, industrial, and warehouse buildings.
Take it from the CEO of Candid Property Solutions, Cristina Ortega. She runs a successful “cash for houses Los Angeles” investing company. She believes that the key to become a successful investor in real estate business is finding a good investment opportunity and taking advantage of it. Call them for a fast cash offer for your house, if you need help with it.