When investing in real estate, you will constantly be making decisions that affect your business. These choices need to be solid in order for your business to be successful. Below are ten real estate investing tips to help you make smart decisions in 2018.
Tip #1: Know Your Ultimate Goal
What you want from your investment business will help you determine what to do. If you are more adventurous and willing to take some risks, then flipping might be for you. If the point is to create a steady stream of income, then buying to rent will be more to your liking. Be sure to think about your goals before deciding on a piece of real estate.
Tip #2: Always Inspect the Real Estate
Some deals go down fast. Some are strictly cash. In both scenarios, inspections may not happen. However, inspecting a home, either with a professional or someone who can spot issues, makes sense on all deals. If the property has issues, you may be able to get a better deal, or you may decide to pass. Of course, not all inspectors are created equally, so be sure to use your own judgment as well.
Tip #3: Do Your Due Diligence
Never buy a property based solely on someone else’s description of the property. If you can’t see it on your own, hire someone you trust or a professional to do it for you. Even if you’ve worked with the investors before, it is always a good idea to verify the condition of the property.
Tip #4: Have an Exit Strategy
Real estate has its ups and downs. You need to know when to hold and when to sell property. A proper exit strategy will help you determine the best time to sell and for what profit.
Tip #5: Use Other People’s Money To Your Advantage
Although it sounds great to buy a home without a loan, it doesn’t make sense to do so as an investor in most cases. Instead, use other people’s money to buy the homes. Then, your renters will pay off the loans. In this way, you can afford to buy many pieces of real estate rather than just one.
Tip #6: Self-Manage Your Properties
If at all possible, self-manage the properties you buy. In addition to spending too much money on management fees, you’ll soon realize that your management company doesn’t care about your investment nearly as much as you do.
Tip #7: Know Your Buying Criteria
Before you begin investing, you should set up a set of criteria to help you determine which deals to take and which ones to leave behind. You should only buy properties that are in the right price range, will have the right after repair value, and enough return on investment. If a property doesn’t meet your guidelines, walk away, no matter how much you think you want the property.
Tip #8: Find the right Contractors
The right contractors are dependable, accurate in their estimates of renovations and rehabs, and do great work. With the right contractor, your flips will make more money, and you’ll make more money per month in rent. The wrong contractor can easily take a good deal and make it a bad one.
Tip #9: Don’t Panic When Things Look Bleak
Many investors panicked during the crash as they saw their equity disappear in an instant. Those that tried to sell did so at a great loss. Those that hung on have now regained all their equity plus more. Remember, real estate investments don’t always go up in a straight line.
Tip #10: Give Yourself Some Wiggle Room
When you are given a timeframe and/or estimate by a contractor, remember to give yourself a little room for error. I suggest adding 10% to the budget and about 20% to the timeline. If the numbers don’t work out with the less optimistic budget and schedule, then you should probably let the deal go.
By following these ten tips, you can avoid costly mistakes that often stop new real estate investors in their tracks. Feel free to contact me with any questions about these tips or for information about other questions you may have. I’d be happy to help.
