If you plan to invest in real estate, you’ll have to do some research before buying your first property. You can’t expect to strike gold with the first house you find, but you can learn how to spot a good investment. There are many ways to profit from real estate, but learning them all would take a lifetime. The idea is to achieve maximum returns with minimum risk. Here are some tips to get you started.
Check Your Credit
Before doing anything else, be sure to check your credit. Your credit files determine whether or not you’ll be able to get financing and lenders will most likely reject a borrower with a high debt-to-income ratio. So if you’re already in debt, it would be best to pay that down before attempting to purchase property.
Find a Good Bank
If you plan to secure your own financing, you should look for a bank right away. Ask another investor or agent who they would recommend, pay them a visit and ask to see the branch manager. Tell them what you’re doing and what your goals are. Remember, they’re there to serve you and they should be more than happy to meet with you. Find out about all their services and get to know everyone that works there, so you’ll never be treated like a number.
Get to Know Other Investors
The Internet is a great place to find other investors. Look for groups and real estate clubs where you can meet established investors, lenders and property managers. You’ll learn a lot and you might even find some real estate leads. Although the best groups to join are local, you can also benefit greatly from online forums. You might find lenders or money partners there who may be interested in working with you.
Find a Good Agent
Not all agents have experience with real estate investors. The typical buyer is looking for a place to call home, whereas the investor is looking for properties that offer a healthy return on their investment. The ideal agent for an investor is one who has several properties of their own and knows exactly what you’re looking for. For more information on finding an agent that understands your needs as an investor, visit GeeringandColyer.co.uk.
Treat it Like a Business
Real estate investing is a business and you have to treat it like one. This means developing a business plan and knowing what your goals are for the next several years. Not only will it help you to see your own vision more clearly, but it will also allow you to be taken more seriously by lenders and potential partners.
Look at Lots of Properties
Look at several properties before buying. Buying the first property you see can be a costly mistake you’ll never forget. You’ll have to study various neighborhoods, properties and scenarios before you can expect to recognize a good deal. Read books and articles on real estate investing and compare what you’re reading to what you find in the real world.
Look for Motivated Sellers
Never try to force a sale on someone who doesn’t really want to sell. Your best deals will come when they’re highly motivated to get out from under the property. The longer it’s been on the market, the less demanding the seller is likely to be. Be patient, look for signs of motivation and don’t be afraid to ask why they’re selling. Are they trying to pay off some taxes or medical bills? Is someone ill? Maybe they’re getting divorced and would like to sell quickly.
Who is Going to Manage Your Properties?
Dealing with tenants is not for everyone. The more tenants you have, the more calls you’ll get regarding maintenance emergencies. A property manager can cost you up to 10 percent of your monthly rents, but they can also help lower your vacancy rates. Even if you don’t think you’ll need one, including one in the budget is the smartest thing to do.
Be Prepared for the Expenses
Keep in mind that you’ll eventually have to pay for repairs. You’re supposed to minimize this by purchasing houses that don’t require extensive work, but there are minor problems in every residence. You’ll also have to prepare for other expenses like accounting, legal fees, evictions, vacancies, garbage and pest control. There should be enough rent to cover these expenses.
Forget About the Perfect Deal
Make sure your expectations are realistic. You’re probably never going to find the perfect real estate deal, but you will find some that are profitable. Don’t miss out on those while you’re waiting for something unattainable. If you use multiple sources to locate properties, you’ll find deals that others will miss. There’s lots of money to be made in real estate, but it’s not like winning the lottery.
Have an Exit Strategy
Finally, you should always have an exit strategy. Decide what your plans are for each property ahead of time and think about what you’ll do if things don’t go according to plan. Have alternate plans in place, so you won’t get stuck with a house you either can’t sell or can’t rent. Remember that markets change and housing prices fluctuate according to various factors. Neighborhoods can also change, affecting your vacancy rates.
Keep in mind that real estate investing is not rocket science. There’s no “magic” formula known only to the biggest tycoons. The most important thing to remember is not to rush into any deal. Everyone makes mistakes and you will, too. The idea is to make as few as possible. The more patient you are, the more clearly you can evaluate the data and make better investment decisions.
KeiraIbbott works in wealth management and likes to offer her insights on real estate investing and other wealth-creation opportunities with an online audience. She is a regular contributor for a number of finance and property websites.
