Real estate investments don’t usually come with a roadmap. And most of the time, the road is too wound up to make any hasty decisions. That being said, it is of course, for the purpose of gaining returns on investment that you would want to enter the real estate market. However, at the same time, you would also wish your profits to cover the risk you take, the taxes you pay, and also the expenses you make on regular maintenance.
In light of the current situation, where the world economy is dwindling due to the COVID-19 crisis, investing in a real estate property could be a long term assurance for your financial future. But, when you are new to the realty market, you should also be a little extra cautious.
Thankfully, there are certain rules that you can follow to ensure that you don’t end up on the darker side of the alley.
1. Finding the right neighborhood
One of the very first things that you should be doing when planning to invest in real estate is looking for the right neighborhood. Regardless of whether you’re planning to put up your property for rentals or to sell it a little later, shady neighborhoods are not good. Essentially, a good neighborhood would include a friendly gentry, accessible markets, and of course, lower crime rates. All of these features are crucial for your real estate investment. After all, neither your tenants nor your buyers would like to live in a place where robbery and snatching cases are a daily bugle.
2. Do your homework before any meeting
It is quite important that you do your homework before meeting up with any seller or a broker. Most often, your broker would advise you against mentioning real estate investments in your portfolio, unless you’re interested in REITs. But that’s a different case, altogether. The real reason you need to be prepared is to ensure that your returns are secured on your investment. For example, if you’re planning to invest in a real estate property for rental purposes, there are several methods to do so. One of these methods is house hacking, where you live on the same property and rent out a portion, or a separate unit to someone. In fact, this post from FIbyREI makes real estate investing look easy. The post has all the possible ways you can make money from your real estate investments with minimum risks involved.
3. Look for diversification in your investment
While it is best for you to invest in a geographical market that you’re familiar with, in doing so you might be limiting your growth potential as well. Not only the diversification in geographical markets but also the types of properties would make a lot of difference to the net ROI. For example, you can invest in commercial as well as domestic real estate properties. Or you can invest in more than one domestic property in different areas targeting different economic categories.
4. It’s okay to budget your fixtures
Experts often suggest that when you’re buying a real estate property for investment purposes, you shouldn’t be investing too much or too little in the fixtures. For example, if your rental property is meant for higher-end markets you should get designer countertops, and luxury bath-fittings. On the contrary, if your target market is at the lower end, you shouldn’t be investing too much in the luxury but ensure a sophisticated aesthetic appeal. Most importantly, you should be aware of the maintenance projects that need to be completed. And therefore, having a budget is all the more important.
5. Be careful when mortgaging your realty
It might be so that you’re successful in the long run, but you may never be able to predict the future for sure. To get this into perspective, consider the situation right now- most of the people are refraining from rental accommodations. And also, the ones who already have been renting apartments are now looking for a permanent solution to their accommodation. This is having an extreme impact on rental property investors, especially the ones who have pending mortgage payments. For this reason, it is always advisable not to over-leverage your credit capacity.
6. Advertise to get the right tenants or buyers
Be it for the rental purposes or for the reselling, you need to understand that you need to find the right customer to earn profits from your investment. This might eventually mean for you to use advertising techniques. Thankfully, however, the modern real estate market is embracing the digital trends blissfully. You can list your property across directories and property listings, publish an ad on Facebook or Instagram. All of these methods are only there to help you find the right customers, given that you advertise the right way.
7. Balance the price and terms for your customers
When you’re skimming through the prospective tenants and buyers, it is important that you not only offer the right price but also set the right terms for your customers. There should be a clear balance between the price and the terms of your financial relationship. It is noteworthy that the real estate market is a highly competitive sphere, and it needs an expert eye to master the sales. But, you can make your way up the ladder by simply beating the price, or the terms, or both, depending upon the customer in context.
8. Keep funds for the tough days
Most important of all, you must be prepared for the toughest of the days. You must have liquid funds to deal with uncertain money crunches and market drops. But, at the same time, you should also have enough financial strength to cope up with the shortage of inflow of cash. It needs a strong spine to be successful in the real estate business, especially, when you’re just beginning your professional career in the arena.
With the onset of a new trend in the market, it shouldn’t be difficult for you to enter the realty business at this time. However, as a beginner, you should be extra careful with your decisions. After all, it is a long walk ahead, and you need to endure a lot on the way.