Expert Tips For Getting Started In Real Estate Investing
Anyone can gain a lot from diversifying his/her portfolio. So, you've decided to broaden your investment portfolio and venture into real estate investment. But a question that will arise sooner or later is: How prepared are your for real estate investment? The real estate niche is a lucrative industry and making the right investment can be an excellent opportunity for you to build wealth and achieve a steady monthly cash flow. Truth be told, while everyone may be raving about investing in real estate, diving in without proper preparations or a little homework can be a catastrophic mistake. Before you take the plunge, do your due diligence to ensure that you at least you understand the fundamentals of real estate investment.
Real Estate Investment Practices
So, which investments might work for you? It’s no doubt that picking the right real estate investment practice can help you earn some serious cash. You can seek out a reputable and successful real estate investor for guidance, or a book, blog and start learning about the best practices. Here’s a guide to get you started on some real estate investment practices that might work for you:
1. Rental Properties
Rental properties are perhaps the most common type of real estate investment, and most people will often have an image of rental property whenever you mention property investment. Typically, you buy a property, apartment, condo, etc. and rent it out to tenants. While investing in rental property might seem easy and simple, it can open the door to some serious risks. Therefore, it is imperative that you learn the ins and outs of investing in rental property. Moreover, you always have be on your toes in order to keep up with the rental market. Thorough research and will not only prepare you to make the right decisions but will also help you downsize the risks involved.
REITs are real estate investment trusts; these are companies or organizations that own commercial buildings such as luxury rental apartments, office buildings or shopping centers. Investing in REITs is similar to investing in a company since you have to use the help of a brokerage to buy shares of a REIT. One of the primary benefits of choosing REITs as your real estate investment is that REITs often pay their investors above-average dividends. When investing in REITs, you need to understand the different sectors available. Different sectors have different risks and return on investment. Therefore, while two people might have invested in REITs one might be reaping more benefits than the other depending on the sector. Examples of these sectors include retail, hotels, industrial, residential and healthcare.
3. House Flipping Investment
House flipping basically entails getting your hands on a revenue-generating property, make some renovations and quickly resell it for profit. It looks easy and glamorous on paper and on TV. But house flipping comes with some considerable risk. Flipping a house might seem like an exciting business venture but as with any other real estate investment, make sure you do your research to help you get acquainted with the property market. This will help you know the prices that properties are selling for as well as renovations that will appeal to property buyers.
After picking a property that you can easily renovate and sell quickly, get down to estimating the renovation cost. You don’t want to spend too much on renovations and end up making losses instead of profits. Done right, flipping homes can turn out to be a great investment opportunity with quick returns as compared to other form of real estate investment.
Tips For Investing In Real Estate
Now that you have a better understanding of the several ways to invest in real estate, here’s a look at 3 expert tips to help you do it right:
1. Choose The Right Location
Yes, location is key when it comes to real estate investment. Whether you have invested in house flipping, REITs or rental property, for more profits, you need to pick a great location using the best commercial real estate firm. Research tax laws, rental laws and rents in the region. Many investors make the mistake of thinking that all locations are equal but end up selling their properties at below-market rates. When investing in property, look for proximity to schools, major roads, shopping centers as well as public transportation. You might also want to take the initiative to do a thorough research on states that allow property investors to make the most money. It would be frustrating to invest in an area or state that has nothing going for it regarding real estate.
2. Hire A Financial Adviser & Property Manager
Never underestimate the risks and burden associated with property investment. To succeed, you need to understand and respect the fact that investing in real estate might not be as easy as some people might lead you to believe. What are your portfolio growth goals? Do you have the resources and experience to manage property? Do you have loans? Are you familiar with property ownership laws and taxes? These questions should help you determine whether a financial manager and a property manager might be a right fit for you.
Outsourcing these services can lessen your burden, and you will also be less likely to mismanage your funds or lose income. A financial manager will ensure that you make sound financial decisions whereas a property manager will pick the right tenants for your building and ensure the smooth running of your rental property. Some of the services provided by a property manager include:
- Settling Disputes
- Building repairs & maintenance
- Ensure that you stay legal
- Come up with a pricing strategy
- Screen tenants and collect rent
Often, real estate escapes the thoughts of many investors. It’s not that they are not aware or not appreciative of the potential benefits of real estate investments, but because they don’t know how to get it right. So they never get a chance to enjoy the profits of property investment. If you are a novice investor, to successfully venture into the real estate, consider working with specialists such as financial advisers and property managers who can help you cut costs significantly while increasing profits.