The real estate industry has traditionally been known as a wise investment that can lead to huge amounts of returns. Big names such as Warren Buffet, Rockefeller, and even Trump have amassed their huge fortune partly due to their real estate endeavors. But before you jump head first and pour all your savings buying real estate, be warned that there are pitfalls that need to be avoided to find success in the industry. Like everything else in life, finding success in real estate requires hard work, too. Here are 7 tips to heed before investing in real estate.
Different cities have different unique sets of buyers and sellers when it comes to real estate investment. It is important that you understand an area’s market before you start buying properties left and right. Investing in a market you are knowledgeable about is a wise decision for any beginners. This way, you will rely on your experience instead of hearsay or rumors. Your knowledge about your hometown will prove useful when you start to acquire real estate. It also pays to track the changes a city undergoes. Some cities have consistently shown growth in property value while others have seen a reversal.
Research, Research, and More Research
If, however, you find yourself limited to a few investment choices you have no clue about, this is where a good amount of market research helps. In real estate, good metrics to keep track of are the construction and vacancy rate of an area. Usually, when prices rise, construction rate increases because it is profitable. But if vacancy rate increases this means the houses are not selling and prices are likely to drop. These are just two of the numerous metrics to look out for before investing.
Know How Much Things Cost
A great real estate investor can look at a property, factor in the number of repairs that need to be done and determine its value. All properties have to have an added value to it to turn a profit and knowing how much things like construction materials, repairs, and cleanup will prevent you from getting overcharged by vendors.
Watch Out for Emerging Neighborhoods
Rental properties are a great way to dip your feet in real estate. Buyers who buy properties in up and coming neighborhoods can capitalize on its tax incentives and growth potential. These are good locations to ensure that investors turn a profit in their investments. Emerging neighborhoods are generally accessible and convenient, usually close in proximity to public transportation. These areas are also adjacent to popular neighborhoods. Properties in these areas don’t stay on the market for too long.
Keep Your Wits Intact
One common problem beginning investors have is jumping too quickly on the first investment scheme that comes their way, or over analyzing a move to the point that they fail to make any decision. Some of these newbies attend one seminar or read an article online and think they know everything there is about real estate investment. The rest do the opposite. They spend hours and hours doing research and attending several talks and seminars but fail to apply it in any significant way because they are too scared to make a mistake.
The best place to start investing in real estate is in your backyard. To some extent, this is true. But extending your reach to other cities and states could offer a nice pay off down the line. Having a large pool of properties in different locations will make your investments more resistant to the constant fluctuations of the local market. Properties out of state are also usually more affordable, especially in smaller cities. Some states also offer lower property tax making the properties there more profitable.
A lot of beginning investors are jumping into real estate in the hopes of becoming overnight millionaires, but that’s rarely the case. It takes time to buy and sell a property, not to mention the numerous costs it entails like repairs, renovations, and taxes. Because the property is a necessary commodity, a good investor will know that their investments will only grow over time through compounding. You use the profit from the sale of one property to acquire new property, and so on. This process takes time and only the truly persistent and patient reaps the rewards.
Author Bio: Kerry Brooks is a passionate blogger who loves to write about home designs, home renovation ideas and home improvement. She is currently working for 123closedhouse.com, which offers easy solution for distressed property owners who are facing personal or financial hardship, to sell their home fast.