Posted on: 6 July 2016Share
When thinking about getting into real estate investing, planning and preparing are two of the most important factors for success. There are a lot of misconceptions about this method of investing, so it's vital to sort out what your actual prospects are and how you can make the most of your new venture. Here are 5 planning tips for the newbie real estate investor.
Remember It's a Business. Although you may not feel like you're running a business, owning investment properties is just that. If you treat it casually -- like a hobby -- you're less likely to make money from it. So, keep good records, make a long-term business plan and handle obstacles like a professional.
Educate Yourself. There is a lot of information to be found on real estate -- everything from how to locate a good property to what renters are looking for -- for free or cheaply. Rather than be sucked in by paid seminars and other get-rich-quick sales pitches, look for books on real estate and talk to local investors (often found in real estate clubs). There are also online investing forums that can be consulted for lots of free advice from others who have done what you're doing.
Think Outside the Box. Before you focus on what house or building you want to buy, think seriously about the area that will serve you best. Rental markets can vary significantly, so it's good to look at multiple locations... even if they're not in your local area. What attracts renters to each specific area? What types of renters are most commonly found? What is the turnover in current rentals? How much competition is there? Is the neighborhood growing, gentrifying and improving? Answering these questions will help you tailor your search to an area that fits your personality and needs.
Find a Good Agent. A good real estate agent can help you tremendously in narrowing your search. Look for an agent who has sold a number of investment properties locally and understands the business aspects of such investing (such as Return on Investment and debt servicing). Other local real estate investors may be able to help you locate the right agent.
Shore Up Your Finances. While you're likely getting into real estate in order to make money, you also should start with a good financial picture personally. This includes making sure you have an excellent credit rating, have little debt (a low debt-to-income ratio) and have emergency funds on hand to weather difficulties as you get started with your property. If you're still struggling with your own finances, you may want to wait before diving into a large investments asset like a house.
By putting time and effort into the planning stages of your new real estate adventure, you can help ensure the best possible outcome -- and a lifetime income stream that will lead to a brighter tomorrow.