Investing in Real Estate: Do’s and Don’ts
Real estate is big business these days. Its five sectors — residential, commercial, raw land, industrial, and special use, are being snatched up. Home prices alone rose about 13% in the first quarter of 2021.
This is why it makes sense to invest in real estate. However, you can’t go into this with your eyes closed. Some steps can make your purchases a success. On the other hand, other actions result in the collapse of your finances.
For an example of these situations, here are the do’s and don’t of real estate investing.
Do Know Your Market
Before you make your first offer you need to understand your market. Not only what’s available for sale. You also need to know the legal intricacies of your region or state.
For instance, Delaware offers Delaware statutory trust companies where properties might reside. You probably need to work with a trusted broker from a company to help you break through the obstacles built within these trusts.
Don’t Start Big
Yes, you’ll probably get a bigger return on investment if your first purchase is a high-rise apartment in a big city. However, you’ll also crash faster if the real estate market makes a severe turn downward. If this is your only property, then you’ll struggle to recover.
Therefore, don’t go with the huge investments at the start. Purchase a four-apartment complex in a smaller city or town with a record of financial stability. This type of real estate property gives you a chance to learn the ropes and prepare you for a larger investment.
Do Ask For Help
It’s a must that you ask for help. It doesn’t matter if you’re a first-time investor or a long-time player in the real estate market. You always need another pair of eyes for a second opinion.
Try to pair up with someone who’s a subject matter expert in real estate. They have the ability to see through the surface of a sale and find potential issues you may eventually encounter. Furthermore, they can locate a deal that you immediately need to take advantage of.
Don’t Overspend
The real estate market is comprised of bubbles. There are times where it seems properties might never decrease in price. However, without a warning, the bubble bursts and prices bottom out.
This is the main reason why you don’t want to overspend on a property. Never assume that the real estate you purchase will continue to increase in value. Even properties in areas like New York City and Los Angeles have seen price decreases. That means the rental homes you purchased in the local college town can quickly lose their value if circumstances quickly change.
Do Push Through The Tough Times
Price downturns occur during the lifetime of your real estate investments. Some might be minor while others can feel like the market is collapsing into a black hole. Whatever happens, push through the tough times.
As already mentioned, the market fluctuates. Additionally, it’s not even across regions. Though your local investments might see a significant price downturn, those in another city or state can be stable or even increase. So, don’t be so quick to throw in the proverbial towel in these situations. Grit your teeth in the tough times so you come out better on the other side.
Don’t be Owner And Property Manager
A mistake real state investors make is taking on duties as a property manager. In other words, they’re the person occupants call if there’s an issue. Doing this might sour your thoughts on future investments.
This is especially true if you don’t have the necessary skills to manage a property. Learning on the go causes frustration for you and your customers. Eventually, they might decide to find another place to live or work.
Don’t be ashamed to bring on a property management group to help service your properties. These agencies features subject matter experts that know how to quickly diagnose and fix an issue. As a result, your retention rates grow.
The above do’s and don’ts of investing in real estate should be memorized. Or at least kept on a notecard for easy access. They’ll help you when you’re unsure what to do.
