Real estate investors can make serious money through rental income, appreciation, and profits. And as they build equity, they are able to leverage it to buy additional properties and increase their wealth even more.
But as with any form of investment, there are some challenges and risks. That’s why having an investment strategy is key to avoiding potential money pits and reducing volatilities. If you are ready to dive into real estate investing, following are some tips to start off on the right foot:
Set Goals
Make sure you have your short-term and long-term goals clearly stated in a business plan. The investment model best suited for you really depends on why you are in real estate investing and for how long you plan to keep the property. As you build your portfolio, you should always assess whether or not the property you are eyeing fits these goals.
Understand Local Market
Understanding the local market not only allows you to get a general idea of what’s going on now, but also to reasonably forecast what the housing market will look like over the next few years. There are a number of factors that affect the market, including supply and demand, mortgage rates, and the economy.
When new construction has been sluggish and supply limited, you have what’s known as a seller’s market. In this environment, sellers have the upper hand with multiple offers over asking. On the other hand, when there are plenty of homes on the market, it could be a great time to buy as you may secure lower prices.
In addition, lower mortgage rates tend to boost demand as financing becomes cheaper and more people can afford homes. Lastly, a strong economy that boasts high employment rates and wage growth will foster healthy demand and cause prices to go up.
Make Updates
Home renovations can be an effective way to add value to your investment properties. While some renovations may instantly increase your home’s value, others may not be worth the upfront expense, so it’s important to keep things simple and practical.
Here are some common renovation areas:
- Adding an extra bedroom or bathroom
- Giving the inside of the home a fresh coat of paint
- Upgrading the kitchen
- Enhancing the curb appeal
- Creating an exterior entertaining area
Hire a Property Manager
As your real estate portfolio continues to grow, so does the amount of time you will need to dedicate to managing the properties. As they begin to scale, many real estate investors will hire a property management team to handle daily operations. This frees up their time to focus on researching, networking, and closing more deals.
Stay on Top of Real Estate Trends
While the real estate business still involves quite a bit of networking and word of mouth, it would be unwise to discount the use of technology in this day and age. Make sure to arm yourself with the latest apps and tech stack. This may include AI-assisted pricing tools, targeted ads and virtual tours, for example.
Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more!
