The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Hard Work, Research, And Read Up
If you want to invest in real estate, you must know that your earnings will be based on the risks you’re willing to take. Not many people would agree that the industry is solid enough to be profitable these days. Believe it or not – it can be. However, research, hard work and knowledge are required to help investors succeed. Get as close as possible to the following 3 scenarios and you might have a real shot at making a good profit from property investment.
Buying property is all about taking money from personal financial assets that are liquid – CDs, stocks, bonds – and then investing that money in an asset that is illiquid – real estate. Basically, you earn a specific rate of return on personal financial assets. This percentage is somewhere at 4-6%. It is important that you attempt to earn a reasonable rate of return that is cash-on-cash on your property. For this to happen, investors will require to pro forma their deals, as well as purchase properties that cash flow-positive. These will help you earn decent returns. Don’t go for prize properties with a negative connotation.
Risk Is Ubiquitous In The Property Investment Industry
Investing money in real estate is risky, and all investors must fully understand this aspect. Real estate development, private real estate funds, TIC investments, fixer uppers and so on, are all incredibly risky profiles over just purchasing a well-established investment property that is cash-flow. In mane of the investment types we just mentioned, people have the highest chances of not seeing a dime. That’s because a lot of bad things can happen. If your wish is to get into the property investment business, go for fee-simple ownership in your name. In addition, don’t forget to do your due diligence; test, review, analyze and whatever you do, just don’t take unnecessary risks.
Time is Money
Certain properties demand too much time and they require extended management to eventually become sensible, profitable investments. In this category we have low-quality properties in dire boroughs, vacation rentals, and college rentals. Good-looking, boring properties that are rented for as extended periods of time (and that have tenants with a decent credit profile), are the easiest to manage. Although in this case proprietors must do their best to take care of their tenants and build a good relation with them; this way, they remain happy and they’ll want to live in that property for as long as possible.
The best properties for investing are in boring, wholly owned, nice-looking and cash-flow positive. They’re out there ready to be bought, although not many investors know how to make sensible choices. Most of them want to make quick cash, so they rush into buying properties that just look on the outer surface.
Invest With Your Head, Not With Your Heart
It’s an outdated adage, but it’s so very true; many investors (beginners in general), don’t bother to do their due diligence. Just because a property looks nice it doesn’t mean it’s profitable. Spend quality time to build a plan, a lucrative property portfolio. Think with your head and adhere to a few basic rules:
- Locations matters a lot
- Pay close attention to the initial condition of the property
- Estimate an amount required for renovations
- Negotiate the first offer
- Don’t allow sellers to fool you with unfounded allegations
Making a good profit with real estate has investors set a few clear goals. Settle where you want to get, and devise a thorough, comprehensive, and cohesive plant to reach that goal. Focus your attention on both short-term and long-term objective, and make sure that your investment decisions match with your strategy.
Do you have what it takes to succeed in this business? Whether you’re chasing short-term yields or long-term capital growth, it’s really important that you learn how to manage your cash-flow. Be a wise investor and have a carefully thought-through outline for your property investment journey. Have a plan in mind, and adhere to it. There’s no exact recipe to success in the real estate business; but there are guidelines and tips investors must abide by if they want to make a solid profit without taking unnecessary risks.
About the Author
By William Taylor and PropertyTurkey.com!