There are many examples of people who have earned a fortune with real estate investments. But this industry, like every other, has many risks associated with it. Regardless of the type of property, you are planning to purchase, or what you plan to do with it afterward (to rent or resell), investing in real estate requires a lot of money. This is the reason why it’s important to take extra measures and precautions to ensure your profit or save yourself from huge losses.
As a result of the COVID-19 pandemic, there is a shortage of property in good areas and this lack of property can create an amazing investment opportunity. However, it doesn’t mean you can earn a fortune by investing without any plan. This guide is here to help you learn everything you need to know before buying your first investment property.
Do Your Research
Before buying real estate you need to do proper research, depending on the clients you are targeting. Look for a property that is situated at a location that will attract the exact type of clients you want to sell or rent to. Make sure it will appeal to the market and reach the returns you are hoping for. Experts at Kansas City Commercial Real Estate recommend using an analytical approach that is logically based on the financial factors only, despite your personal likes and dislikes. Investments aren’t about emotion, but economics. This mindset will surely help you find the best property.
Calculate Expenses And Profits Beforehand
The popular saying in this business is “Only the paranoid survive”. Well, that’s a little too harsh, but there is no harm in being cautious. Considering every detail beforehand is essential in the real estate world.
The first step is to calculate all the money you have and that you can borrow. Never buy investment properties without a financial plan. Then, estimate how much it would cost you to purchase and renovate the property while keeping in mind the operation costs. Finally, plan the price you are going to list this property for, cut out all expenses, and roughly estimate your potential profit. This way you will keep yourself in a safe zone and lower the chances for huge losses.
Secure A Down Payment
When you are buying a house to live in your down payment will often be around 3%. But when you are buying investment property the situation is quite different. You can expect at least a 20% down payment because mortgage insurance isn’t applicable for investment properties. Not only do they require greater down payments than regular buildings, but they also have strict approval requirements. Don’t forget the renovation expenses before you pay the down payment.
At the end of the day, investing in real estate is like any other business. It can really go either way: You may lose a lot of money and have a disastrous experience, or you can earn a good chunk of money. Make sure you follow these tips and play it safe. If you are smart and cautious, the chances are that you will be on the winning side.
Diversify your investment portfolio
A final option can be diversifying your investment portfolio. Real estate investment trusts are another great real estate investment option. REITs own multiple income-producing properties, such as commercial real estate like hospitals, apartment complexes, and offices. Investing in one of these can help diversify your portfolio and make a profit.
You can also team up with other investors to get started with small-scale real estate syndication. In this scenario, a syndicator (probably yourself) teams up with one or more investors to invest in mid-to-large size properties that would normally be out of reach for a single party. Both the syndicator and investor reap the rewards.
Combining real estate syndication with an online platform is overlooked, but an amazing way to diversify an investment portfolio. Consider giving it a shot, should the opportunity arise.
Comments are closed.