Over the last decade, the real estate market has been booming with new entrants into the industry. Many consumers are considering real estate investment to earn hefty returns down the line. Fortunately, the real estate market is quite favorable for first time investors, and if you’re one such investor, who wants to explore his potential in the industry, now is the best time to begin.
You have probably already done your basic math and determined your purchasing power after considering principal payments, interest payments, your current expenditure, taxes and other fees involved in the investment process. However, the decision making doesn’t end there; you still have a long way to go to ensure success.
What property will best suit your investment plans? How much profit can you make from the deal? What risk do you have to take? What location to choose? How do you know you’re making the right choice?
While there are no surefire formulas for success with real estate investment, there are 4 basic tips you should always bear in mind to ensure you’re making a smart purchase.
Tip # 1 – Evaluate the Risk
There is no real estate investment which has zero risk; fortunately, there are solutions to minimize this risk. It’s always safer to invest in established residential property. Ensure you do your due diligence on the property by studying current market trends, determining the market rate of the property, getting inspections conducted, reviewing reports and browsing through records before you purchase. If it’s an all clear, there’s your green signal.
Tip # 2 – Stick to the Familiar
As an aspiring investor, one of your many goals would be to gain an edge over other investors. However, doing so by investing in an exotic location, only for the sake of a unique strategy, is not advisable. Stick to what you know and what is accessible. Local neighborhoods, which are known to fare well in the market, are the best place to begin.
Tip # 3 – Know the Cost of Ownership
The cost of your investment property is not restricted only to its purchase price. You have to consider other costs beyond the down payment such as the monthly principal and interest payments, insurance costs, renovation costs, taxes, advertising and professional fees. Only once you’ve covered all the expenses you are likely to incur, can you be confident about your decision to purchase or not.
Tip # 4 – Look for High Returns
You cannot expect to make a fortune overnight with real estate investment; however, if you start slow, take it patiently and play the game smartly, you will reach your investment goals. Looking for investment property which will deliver high returns is one such strategy, and such properties include pre-foreclosure homes, foreclosure homes and bank owned properties. Establish contact with a local real estate agent to provide you with information about such “lower than market rate” properties.
The bottom line is that it’s your money on the line; therefore, you cannot afford to be callous with it. Choose wisely, plan smartly and you will find success!
