Do you need practical guide to real estate investment?
Apart from being the oldest form of investment real estate also boasts about the profit margin that can be gained in a very short period.
It is not a primrose path as many believe. Buy a property, rent/purchase it and you have made a profit; unfortunately investing in real estate is not as simple as it appears.
Behind the scenes you lose more money and unless you track everything you are losing than profiting.
This post will not only acts as a guide but will go as far away to present the common mistakes that occur while investing in real estate.
Fortitude and patience
As in any investment risk is evident with being mindless. Real estate seems to have a larger portion of risk when compared to other forms of investment for two reasons:
- the market is dynamic and
- the upfront capital is huge.
Without fortitude and patience it might be impossible to land on a profitable practice in real estate investment.
This is not another ecommerce wherein you buy a product and sell it for immediate profit. After investing on a property you ought to make sure that the profit stays. The tricky part comes when the real estate market goes bearish and there is a sudden fall in house prices making it below median.
Though this might be the best opportunity to invest you cannot turn away the loss suffered and hence financing in a creative manner is required.
For better financing you need to have a goal in mind. Goals are generally of two types. Either flip the house for immediate profit else rent it and enjoy on the annuity at pleasure. Most people in the business would go for flipping as they buy and sell at large. On the other hand, people who are new to real estate business might prefer renting.
Go for flipping only if you are sure to find a buyer. However, there is an advantage if you have decided to flip a property. Mortgage with a low interest rate might prove beneficial though ensure the mortgage resets at a later stage. Upon finding a buyer, the payment of the principal amount can be handed over while you have to pay only the interest.
Cutting loss and maximizing profit
As mentioned before, there are many factors which minimize your profit. You might have just flipped a property for a $10,000. Unfortunately, upon analysis it was revealed that the deal resulted in a loss of $1000. The real estate agents and contractors charged $5000 each whereas your attorney was responsible for $1000, pushing you into loss.
Cutting down on unnecessary payments can be done by contributing work force from your side. However, jobs which require a pro should be avoided unless you wish to overpay for it later. But if you are skilled at certain jobs then do it yourself.
Replacing old locks with new ones, changing the wallpapers are few jobs that can be done easily. Adding a cabin or renovation work should be left to the professionals. Moreover, as far as possible avoid hiring agencies. Apart from sticking their head for the 10% to 15% commission they also consume first month’s rent.
Knowing when to hire
Just because I said to avoid agencies don’t be stubborn and ignore them altogether. Investment is done in the hope of making profit. If you find an agency or an agent to land you on a profitable deal then it is commonsense to hire them.
Let’s say you are searching for a tenant for three months and yet there seems to be no hope. Spending another three months would be like chasing the wind. At such time hire an agent, provide the first month rent as fee and there you have saved the loss of two months’ rent.
When you are making a deal for the first time it is essential you hire a legal advisor. Later you will be happy about it as coping with trouble some issues might arise. But learn everything possible in the first deal so that when you are on the next deal the expense for hiring a legal advisor goes under your profit.
Track the trend in real estate market
Newspapers should be your philosopher though it is an inanimate object. They have the entire essentials required to track the real estate market. Follow them wisely and you will never regret.
Apart from newspapers local classifieds are also beneficial. Jot down the prices that are offered for properties in and around your city. Calculating them will give you an approximation of your property or the sort of property you like to invest in. If opportunity allows you to take a look at property that are the same as yours and peep at their price then you can do better.
When investing in real estate, be practical. Property is bought and sold to make profit. Though in some cases the profit gained might be high, it definitely is not the short cut for becoming rich. Greed should never be allowed while making a deal. Be reasonable and practical; reasonable while setting the profit margin and practical while making a deal.
Becoming rich in the shortest time might not be possible by investing in real estate. But profits might keep on building increasing the overall cash flow if decisions are made sanely.
Awesome gallery of great houses as a conclusion