Are you a real estate investor, or perhaps considering getting into the market? In this blog entry we offer four tips that will improve your chances of success.
- Realistic goals and expectations: Rental real estate investing can provide you with a long-term and steady income, but you’ll have to work for it. The days of buying properties and flipping them for a quick and massive profit are gone. Be prepared to do the research necessary to buy a property in a desirable location. Once you find one, crunch some numbers to determine if it will work out financially. Is it a building that people will want to live in? If not, how expensive will it be to bring the place up to par?
- Research the neighborhood. Location is everything. When you’re looking at a property, consider its positive features, such as proximity to public transportation, waterfront location, or city views. These are assets that will attract tenants. Check the zoning laws and find out about future developments: you don’t want to buy a building if a new highway is in the cards. Determine how viable the rental market is before you sign a contract.
- Look for a good price. An old maxim states that you should buy a property for 12 times its annual rental income. If you can get nine or ten times that total, even better. There will always be variations based on property type, location, and appreciation prospects, but don’t pay more than what your monthly cost will be.
- Have reserve cash handy. If you own your home, you know all about unexpected expenses: that broken washing machine, leaky roof, or surprise assessment from the condo association. Keep a cash reserve to cover any unexpected situations, which include unoccupied units in your building. If you factor these sporadic expenses into the overall math, it will be easier for you to decide if the project is worth it.
Investing in real estate can be a lucrative diversification, if you are in the right position to buy and can do so in a location that will generate a positive cash flow. Rental real estate will offer a strong complement to your other holdings, such as stocks and bonds, if you’re prepared to do what it takes to make it work.
If you’ve got legal questions about your real estate investments, we’d love to help. Please contact us today to learn more!
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