The 6 Tips To Property Investing You Need to Remember

Written by Posted On Thursday, 16 July 2020 14:48
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Investing can seem both an exciting and daunting process. On the one hand, investing in property offers you a means of reaching your goals. On the other, property investments can provide you with profitable returns, if you make wise decisions along the way. 

The current real estate market is filled with challenges, and if you are looking to invest in this market without prerequisite preparations, there is a danger that you will suffer negative financial consequences. The beginning stages of becoming a property investor can be hard, so here are five tips that you should keep in mind as you enter the world of property investments. Ready for the ride?

Have a Goal in Mind

Before you even look at properties, you need to have a goal in mind. Not all real estate and property investments are the same. Some people might purchase a property and rent it out to eventually make a profit, while others will fix it up and then sell it. The option you choose can impact the type of property you purchase.

 

People who are looking to fix and flip will often purchase a fixer-upper home for cheap, and then spend some time fixing it up before selling. But those who are looking to make the profit from rent will want to rent it out ASAP, so the house should be at least semi move-in ready.

 

Also, in addition to the house itself, you need to have other plans in place. For example, if you want to be a landlord it could be a good idea to create and use a free rental application tool to help you learn more about potential renters quickly. These are plans that can help improve your home or operations to easier reach your aforementioned goal.

Get Your Finances Organized

Whether you are looking for a fix and flip property or one that is ready to receive tenants, finances are a critical consideration. While obvious, it is a bit more complicated than at first glance. Purchasing an income property is very different from buying a house, and it comes with more risks. 

An income property means you don’t have an idea of how your tenants will treat the property and the amount of work required to carry out repairs throughout the year. For this reason, you must have a stable financial foundation as well as a low-interest loan. 

For starters, make sure you have enough cash set aside to handle the ups and downs that come with running a rental. Your finances should be enough to cover payments on the house without the rental income you expect. After all, whether you have renters or not, your bank will still expect regular payments made on the property.

Further, set up an emergency fund to cover anything from burst pipes that could cause property damage worth thousands to fixing light fixtures. It also helps to remember that your rental property business is a business and not a home. Therefore, maintain a separate account for business dealings for spending on anything related to the property. 

Know Your Market

Since real estate is one of the most malleable markets, you should understand that it can change at once. Besides, it is difficult to predict when it is likely to go up again unless you have done thorough research in the market. 

A high occupancy rate is a good reason you should consider investing in the real estate market. However, it’s imperative that you are familiar with the mortgage market to ensure the profitability of the investment. Getting a great mortgage contributes towards lowering your costs and boosting cash flow potential of the property.

Most investors go straight into what they know and are familiar with, which is a good start, but liking real estate investing is not always an indicator it is the best investment for you. A right decision is informed by digging deep into research and finding out where you are putting your money. While personal background and career may have an influencing factor, real estate investments, like other purchases, must have the necessary research done. 

Make sure you work with a professional by your side. Augment the advice you get by doing your research into all facets of purchasing a property, including reading blogs such as the one from ISoldMyHouse.com

 

If you understand the market, you know the right time to buy a property and when to wait for the right price. Further, you should have the skills to gauge when to raise your rental rates. Generally, you will be in a better position for more positive returns when you can predict the real estate market.

Choose the Right Property

If you do not think you have the tolerance or patience to watch your investments, then maybe the real estate market is not for you. A significant characteristic of any investment is that it usually is slow-moving and the results do not come in as fast. In addition, you should be prepared to experience a couple of high and low investment moments due to a roller coaster of changes. 

You need to keep these things in mind from the get-go, and you will handle the investments in a better manner. At the same time, you mustn’t panic when you experience a dip in your investment as things can turn from negative to positive, and vice versa, in a matter of minutes. Do not attempt to imitate investors who are in and out of their properties, because your ultimate focus should be on the long-term gains of your real estate investments. 

When delving into the real estate market, make sure you start low and slowly work your way up. Doing it this way ensures that you create a solid foundation for your real estate venture. As you begin, purchase cash flow-positive properties and buy properties you actually love!

Property Care Planning

Managing any property is no easy task. Should you opt to become a landlord/lady, you have the responsibility of collecting rent, keeping books, screening tenants, filing taxes, handling maintenance and working out insurance plans. Further, you will also oversee writing the contracts and all that goes into managing your property. These jobs can be a challenge for some if they choose to handle all the work alone.

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For many others, such tasks are more than daunting, if not impossible, to accomplish. If you feel you belong in the latter category, you should probably investigate working with a property management company. Such companies will cost you anything between 5 to 10 percent of the monthly rent collected. 

A professional property manager handles the collection of rent and late fees, a significant component that ensures reliable and consistent cash flow. The management company also brings knowledge and expertise required to protect the property owner from vulnerabilities and potential lawsuits. Further, the property manager ensures your investment is in good condition for rent and possible resale, so you can sell it ‘as is’ within a short time. 

Tenant Screening

Once the basics are taken care of, you need to start screening for tenants who will rent for the long-term, pay their rent on time, reduce wear and tear of property, and cause fewer problems. At the same time, be aware that your tenant will also screen you, in some sense. The best clients come prepared with questions, which is a good sign of their dedication to signing the lease and your property.

Conclusion

Handling your income real estate business is likely going to be a challenge, especially if you are not prepared for what’s coming. However, mastering the basics above will enable you to be ready for the next big step in your journey; making a profit.

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AJ Philips

AJ is a passionate writer who likes to share what he's learned for the day - and he learns something new every single one. His expertise in the real estate comes from both personal and professional experience, and AJ is happy to break down the complexity of the real estate world for everyone.

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