We wish that we could tell you there is a magic formula that you put into your life and you automatically become successful overnight. The reality of it is, we don’t have that. Although we are lacking in earth-shattering equations, we make up for it by being able to provide you with the knowledge and education you need to get started.
Not A Magic Real Estate Equation
Real estate investing is hard, and it’s a journey that most tend to give up on. Ensure that you have the financial means to accomplish what you plan on doing and stick to it. One of the most important things when it comes to investing is being able to stay organized. You would think this is a no brainer, but it’s harder than it sounds, especially when you begin to own multiple assets and you find yourself in a rut.
Becoming a successful real estate investor requires being able to find good real estate investment deals and putting them together. You may start to become discouraged if the first couple of properties you were interested in didn’t turn out to what you thought they would be. Don’t give up! It takes diligence, financial planning, organization, and a team to get the real estate investing wheels turning.
Stop worrying about the little things that you didn’t set out to do. Your knowledge is in real estate investing, and you know what a good deal looks like. You didn’t decide to become a closing attorney, a management expert, an inspector, or a repair person so use well-recommended professionals in your community to make your life easier.
You must learn how to appraise and find the true value of real estate. This information will help you make better investment decisions. Realtors, appraisers, and banks determine what a property is worth by looking at comparable sales usually three to five sales of similar property that has recently sold in the same neighborhood. Start doing the same and use a realtor as your launching point for success. Realtors know what they are doing and, if they’re good, they’ll know the market and will want to help you find the opportunity you’re looking for.
Something that many beginner investors believe is the “perfect timing” house. The real estate market will almost always be changing frequently, so there is no such thing as an ideal real estate market for investing.
Leverage is very important for investors because the less cash you put down on each property the more properties you can buy. If the properties go up in value your rate of return goes up. However, if the properties go down in value and you have a lot of debt on the property this can result in negative cash flow. Since real estate is generally cyclical negative cash flow is usually only a short-term problem and can be handled if you have other income or cash reserves.
“Nothing down” investing can be very helpful to protect against negative cash flow for high leverage investors. If you are a long term real estate investor, leverage will work in your favor if the markets in which you want to invest in, appreciate in the long run. This means that your income from the properties can pay for most of your monthly debt.
Strategies to Limit Risk
To limit risk, become educated in your local real estate market first by understanding the large scale trends from global down to national regional and specific neighborhoods. Learn about target neighborhoods with the help of successful real estate investors in your area along the way.
Real estate investors can help you interpret market indicators such as the average length of time houses have been on the market this month versus last month or last year. This information will help you make better investment decisions.
It is important not to guess the future of a local real estate market. You need to have a clear plan in mind when purchasing a property. As a real estate investor, you must have a backup plan or two in case your original investing plan doesn’t work. It’s imperative to know your market and your plan before you begin to invest! Although we didn’t give you the secret ingredient to real estate investing, we hope that this will be your starting point into successful investing.