It goes without saying that there is a lot of wealth to be had with real estate investing. Whether it is by securing or buying a multifamily housing investment property, developing existing land, or making repairs and improvements, these are all ways that investing in real estate can make anyone successful.
Real estate is constantly evolving and it seems like it can affect everybody no matter where they call home. Regardless of that, there will always be a greater amount of return than there would be on Wall Street. This is because in real estate the amount of risk is determined by the amount of time a property is held. A property’s value also goes up when an improvement in the housing market occurs. Here are six ways to become successful in real estate investing.
1. How and When to Choose a Market Investment
In order to garner success with investing in real estate, you need to know how and when to choose a market investment. This means you should concentrate on areas that are either densely populated, are growing, and are close to shopping or other features that benefit a population.
Your method also needs to match the market you plan to invest in, as well as understand that all construction normally happens after a housing boom occurs. When this happens, a big surplus of homes become available and thus cost less. Normally, this occurrence will last no longer than a couple of years and then the market’s pricing floor will be established.
2. Obtain Investment as Cheap as Possible
One could easily compare real estate investing to stock investing. The amount of return on an investment gets determined by the price you initially pay. Regardless, you need to be aware of what the investment involves. Is it in an area that is not safe? If it is, then you will unlikely get the amount back that you put into it as you sell it.
3. Obtain Property from Desperate Sellers
Ideally, if you are able to obtain property from a desperate seller, then you will likely pay a lot less than what the value currently is. Going this route can open up many opportunities to obtain a great deal. But it is advised that you play it safe as these properties could need major fix-ups. To avoid this, keep a lookout for the properties that are not listed for sale yet.
4. Know What the Costs Will Be
As you start out in real estate investing, make sure that you know what the costs will be before you finalize anything. Keep in mind that there is a lot more involved than just the price of the property and any commissions for realtors. You need to realize that you will be taking on any needed repairs.
In order to overcome any hurdle with repairs, it is best to have professionals complete any necessary work. That way you will know that the property will be up to code without taking away from the value.
5. Market Understanding
When you have a firm understanding of the market, you will be able to prevent any issues from arising. Once you have a complete grasp of the market, you will be able to assess an investment that you are interested in. Having a thorough knowledge of the market will also allow you to know the property prices of area homes broken down by square foot as well as the amount you could charge a tenant rent.
6. Keep Investment Risks Manageable
It is not difficult to keep your investment risks manageable. You do this by preventing yourself from obtaining too much debt. As you buy property, only put down a minimum of 10%. If you can, try to go for at least 20% so that you will not have to obtain insurance. This will also ensure that your loan APR will be low. You will also want to set aside enough cash to decrease any risk of having to sell sooner than expected, which can cause a loss. Having the cash lets you maintain the property for a while before you are ready to vacate it.
Being able to tolerate the risk involved will allow you to control it regardless of what the reasons are for obtaining it.