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4 Vital Tips to Follow When Investing in Real Estate

August 11th, 2016
Investing in real estate is often considered to be a preferred avenue for building long-term capital. This case for success is true to form when a methodological approach is applied, backed by a clear work plan, up-to-date information, local market perspective and the investor's acumen, which is needed to minimize risk and maximize returns.

Whether your plan is to create an income for your retirement years, to create financial freedom, or to build an empire, here are four vital tips to follow when you begin the process of starting your real estate investment portfolio:

  1. Treat your real estate investment as a business.

It is recommended to view your real estate investments with a professional business mindset. Once you have defined what your financial goals are and what you are setting out to achieve, a solid business plan, including a calculation of expenses and projected profit, should be developed to span the upcoming years. Deducting your actual profit from rental income must take into account the following: agent fees, service and insurances charges, mortgage interest payments, as well as additional running costs. Investment alternatives should be weighed, thorough analysis of deals must be conducted, and properties with attractive terms that meet your goals should be earmarked for acquisition.

  1. Information will empower your investment success

It is highly recommended that you acquire at least a basic level of understanding about the subject of real estate investment prior to setting out on your initial venture. It is imperative that you do your homework and dive into the range of practical guides and professional articles that can be found online. You should employ an A-Z strategy on schooling yourself on a range of topics; these topics should cover all aspects of the business from due diligence of a property to the financing of the deal. Even the real estate sharks keep up to date on new trends, as well as opportunities in up-and-coming cities and neighborhoods.

Seek guidance from experts and experienced mentors in areas where your personal knowledge is lacking. The more effort you put into educating yourself, the greater your chances are to avoid pitfalls.

  1. Local market proficiency is elementary

Location is key in any real estate investment, and who better understands the true potential of an asset than a local investor who has a grasp on the current market. Prior to investing money, you should conduct comprehensive due diligence on your optional locations in addition to consulting with local experts. These experts can help you determine the prime areas for purchasing properties.

Renowned investors and investment platforms with portfolios in specific markets have an edge, as they are in the know regarding the actual performance of their current investments. It is also important to gauge the macroeconomic factors relating to the current job market and population growth in the target city or area which will affect your future rental revenue stream.

  1. Secure your investment with professional property management

Once you have acquired the property, a whole new world of property management is revealed, which is a realm of its own. Screening potential tenants, the handling of leases, and ensuring monthly payment of rent is just one side of the coin. The other side of property management entails the upkeep and maintenance of the property, accountability, and dealing with tenant complaints and emergencies. Although it may incur additional costs that may impact projected yield, utilizing a professional property management company will add significant value to your investment by providing you with:

  • Higher quality of tenants

  • Shorter cycles between tenants and higher tenant retention

  • Lower maintenance costs

  • Less time consumption relating to arduous legal issues

  • Strict rental collection!

  • And most importantly, less stress for the property owner

These pointers are just the tip of the iceberg when it comes to getting a better understanding of real estate investment. Take an educated and sober look into things prior to diving into the deep end. This is possible by utilizing the collective knowledge of experienced investors with proven track records, who are available to you online. It’s always best to be prepared, no matter how lucrative the opportunity on the table might seem to be.

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