If done right, real estate investing can be a great source of secondary income and even become your primary source of income. Starting on the right foot and understanding the process is imperative and can save you time and money in the long run. If you are currently a real estate investor or thinking about becoming one, here are five essential tips that every real estate investor should know-no matter where you are in the game.
Tip #1: Network and research
“Prefer knowledge to wealth, for the one is transitory, the other is perpetual.” – Socrates
Investing your time researching, networking and understanding the market is the first step in safeguarding your financial investment. A great place to start is by attending free real estate workshops, seminars, and clinics in your area. You can visit www.nationalreia.com to locate local investor groups.
Tip #2: Set goals and start small
Start small, local, and slow. Remember, this is your money, time, and effort that you are investing. It is important to have a written budget and plan on how to achieve your goals. Keep in mind you may not earn a huge return on your first investment because it takes time to fully understand the market. Keep an eye out for smaller deals that will give you the opportunity to still make a profit and give you the experience needed to become a more seasoned investor. Focus on deals closer to home, and keep your expectations realistic.
Tip #3: Be ready to work
Whether you are a DIY expert or plan on delegating the entire process of acquiring your investment property, understand that no matter the level of your involvement, it will require hard work to be successful. Be prepared to work long days, evenings, and weekends. Overall, the amount of work you put into your real estate investments will show in the end.
Tip #4: Use real numbers
Never manipulate the data regarding the potential return on your investment. Over inflating potential returns on your investment may cause you to make a bad investment decision with large losses that could be difficult to recoup. Don’t expect to sell or lease your investment property for substantially more than market value. Remember, this is a business decision that should be free of emotion and spontaneity.
Tip #5: Consider all the costs and protect your investment
As a real estate investor, you have done your due diligence, and you are ready to make an acquisition. This may be an exhilarating and exciting moment, but you should always be aware of all costs associated with making this purchase. For example, you may have legal fees for a real estate attorney, listing fees to find tenants or buyers, unforeseen repair costs, property taxes, and most importantly, property insurance to protect your investment.
In my opinion, protecting your investment is critical, and many times, challenging. With each new hurricane being described as unprecedented, and an increased litigious environment, it is important to have the appropriate insurance coverages to safeguard you from large financial losses. By doing your research and asking the right questions, you will be set on a path to financial freedom. Some things to consider are whether or not your insurance policy has the appropriate level of liability insurance, and what steps you need to take to properly insure your investments.
These five tips will help guide you to make the best real estate investing decisions, help you gain more experience, and protect your investment. Don’t rush the process, and in time, you will reap the benefits from all your investments.