Every successful real estate investor has goals; you wouldn’t go very far in real estate investing without them. Here are some guidelines to help aspiring investors achieve their real estate investing goals.
Your best measure on the value of property is the rate of the latest sales in your area. The same theory applies for rent as well. Low prices are often justified by low to reasonable rent meaning if the renters could afford higher amounts in rent, they could afford to buy their own property. Therefore, there’s a need for reasonable rates in rent.
Check your local listings to get a feel for what the current rent market looks like. If there are plenty of ads promoting first month rent-free, it means they are trying to entice renters, so the vacancies are likely high. You may want to temporarily stay out of this market.
When just starting out, it makes sense to keep your real estate investing confined to your local market. One of the last things you need are huge expenses for out of state travels to check on your investment.
Do not solely base your decisions on tax laws; they can and do change constantly. Be more interested instead on the right property, with the right financing, regardless of the tax code.
Know your market. Start with real estate investing that you already have knowledge in, be it fixer-uppers, starter homes, foreclosures or condos. This can give you an upper hand as you will already be experienced in the area; then, as you learn the ropes, you can get into other real estate investing areas.
Gain knowledge in costs associated with your investment. Read through the financial statements and know your way around it. Costs such as property taxes, operating expenses, vacancy costs will be frequent items that you need to familiarize yourself with. Know what a cash flow statement looks like as well. When you are knowledgeable in these costs, you can be able to effectively manage them.
5. Know Thy Tenants!
Collect tenants’ security deposits at closing. Also, if the last rent increase was fairly recent, be warned they may be considering moving. If they are on short-term lease agreements, they may be there to attract unsuspecting potential buyers.
You can’t afford to ignore property taxes. They make up an important part of your investment, as they are the difference between you making positive or negative cash flows. Consult a tax advisor who can help you use your taxes to your advantage.
Be sure to research seller’s insurance coverage. If its basis is lower-than-current replacement value, then your insurance cost may increase when you pay a higher purchase price.
Take the time to verify recent utility expenses. This should especially be the case if any of these costs are included in your tenant’s rent.
Get an accountant who is well versed in the real estate tax arena. Successful real estate investing relies heavily on tax insight.
Always perform a thorough inspection of the property that you intend to buy. Be sure to examine the site that it is at. If you have to, hire professional inspectors so that they can get into the details for you on factors such as the structural mechanical system of the property. This will save you the risk of entering into a bad deal.