Investing in real estate is one of the most common and profitable of all investment strategies. Most people who do invest in real estate are beginners and think that buying cheap properties or fixer uppers are the way to go. Many people lose a great deal of money using this philosophy. I have made numerous real estate investments alone, and with partners. Many have been losers. The few that I have made money from have been because I followed a simple five part plan that I will share with you. These are simple and easy to follow ideas that everyone should use when they invest in real estate.
Step One: Buy Small and Stay Small
Buying small housing units or rentals are the way to go. Just because you think a large apartment complex might bring in more money, you also have to realize, that it comes with a large amount of maintenance and headache. After a typical tenant leaves the average apartment, there are usually a lot of renovations that need completing. From painting to carpet cleaning and some drywall or appliance repair, these really add up, and when you have multiple tenants coming and going, the prices really add up. A small duplex or triplex can be a small investors best bet. It’s easier to control who rents and who doesn’t and you can get on a more personal level with the renters. There’s less maintenance and more cash coming in as well as less overhead for employees and care takers.
Step Two: Pay for good renovation talent, not the cheapest bidder
It takes a lot of talent and hard work to keep up with your real estate. If, for instance, you are buying a home that needs some work, it’s probably not a good time to use someone who’s just learning how to use a screwdriver. That includes you as well. Just because you can roll on some paint, doesn’t necessarily qualify you for a job. Try to find someone with good references and is licensed and insured. Remember, those few extra dollars you spend can be recouped by adding it into the total sales or the rent you charge.
Step Three: Buy in the Best Location You Can Afford
The three rules for real estate are always location, location, location! It’s never stressed enough, but location of the property is relevant to the price. Would you rather buy a cheap rental in the slums and save on the property price and lose out on the rent and property value, or buy a more expensive property near a golf course and make up for the extra expense with rent or rising property values? Buy the best you can afford is the main rule to property searches.
Step Four: Look at the Property for What it Can Be, Not What it is
If you examine the property for what it may become, then sometimes you can find a great bargain no one else sees. A commercial piece of land on the outskirts of town may seem like a bad idea for office space, but a closer look may reveal it would be ideal for setting up a storage rentals and reserving a few for construction offices. Just keep an open mind to ideas, and you may find the gem in the rough.
Step Five: Don’t Buy That Special or Unique Property
The home with the downstairs bar or rare wood trim are some of the few places I mean. These “unique” properties are too much for your average family. Sure, you may be able to sell them for more money, but now you’ve limited your window of prospective clients. In case you need to unload these properties quickly, you’ll find that average means a quick sale open to a larger market of prospective buyers.
Using these tips and techniques can help improve your investment strategies in real estate, and help increase your investment where it really counts most; your wallet.