Most people who start on the path of real estate investment will only acquire one property. But, if you truly want to see profit and increase your wealth you need a much larger portfolio. As you begin your journey into real estate investment, adjust your expectations of overnight wealth. While you won’t get rich overnight, if you play your cards right you will see high long-term gains.
Here are our 5 tips for getting started in real estate investing:
Keep Your Heart Out of It
When you buy a home as an individual you are looking for the home you want to live in. As a real estate investor, you want to keep your personal preferences out of the game. Always purchase an investment property based on research. Look at rentals nearby and see if you will be able to cover your costs and meet the gains you desire. Purchase in an area with high demand to keep your vacancy rates lower. Doing proper research takes time, but it’s better to know the market than to purchase blind because a property feels like somewhere you would want to live.
Make a Plan
Purchasing and managing one property isn’t too overwhelming, but if you’re really looking to build your wealth you need to build up your portfolio. Real estate investing is a business. Before you get started you need to write and understand your business plan. Outline your short term and long term strategy based on your goals. Are you looking for short-term income or long-term capital gains? Having a detailed plan will help you streamline decision making and prevent you from choosing poor investments.
Investing in real estate can be a lucrative, and relatively safe option. However, it is not a get rich quick scheme. Property is a commodity we all need and has been proven to see steady and long term gains. It’s hard to get rich buying and selling property, because buying and selling takes time and involves numerous costs. To play the long game, use the gains from one property to eventually buy another one. Once you have two rental properties, you can compound the gains of those to buy a third property within a short time frame. This slow build of your portfolio is likely to pay off in spades 10 or so years down the road. For example, take a look at the gains you may see in 10 years if you invest in a condo.
Spending the time and money thoroughly investigate the property is one of the smartest things you can do as an investor. Schedule an inspection, ask the owner for due diligence documents and pay for a sewer scope. The more you can learn about the bones of the property the less you will be surprised moving forward. It’s understandable to want to complete the transaction and wave inspections in order to present the best offer, but it’s dangerous. Do everything in your power to ensure a solid investment.
Hire a Professional
Don’t fall into the “money saving” trap of managing a property on your own. Being a property manager, even for just a few properties, can quickly turn into a full-time job. Hiring a property manager eliminates the stress of finding suitable tenants, keeping up with rental laws and undercharging for your property. With an expert in your corner you will be able to sleep easy at night knowing things are taken care of (and because you won’t receive emergency calls from tenants at 1 a.m.!) Hiring a professional gives you access to expertise in the market and in tenant acquisition, helping you get the most out of your property.
If you’re ready to start investing, or if you’ve already purchased a property or two, contact us today to learn more about our property management services.