If you are a first-time real estate investor, there are lots of things for you to learn. Real estate investing is more complicated than investing in stocks because of the financial, legal, and extensive due diligence requirements involved. That’s why you are advised to give yourself a solid education before you purchase your first investment property. Here are top 10 tips to help you become your investment more profitable:
- Set your budgets carefully. Purchasing an investment property requires a lot of study, planning, and budgeting to be certain that your investment will have a positive cash flow that is in your expectations. Especially you need to set your budgets carefully because it’s very important to get a satisfactory return on investment through either reselling the property, or through rental income. Evaluate the trends in the market as you are setting your budget, to make sure the purchase allows for expected occupancy levels or changes in value.
- Choose a property that is more likely to increase in value is the most important decision you will make, so buying at the right price is absolutely critical. To evaluate your potential market, don’t only look at what homes are currently selling for, but study people’s reactions to those prices. You are advised to do your research and find out the right property at the right price for your investment.
- Research your market carefully, look for the areas of town that are on the rise. Also, watch for markets near these areas which may be on the low end of the curve, and getting ready to start an upward trend again. As an investor, you need to find markets which are starting to move up the investment curve so that you can sell towards the top.
- Buying real estate properties have its own unique needs and different market pressures. So do your research and understand your market closely for the reasons you are buying investment property. Whether you are buying vacation rental properties or homes to fix up and resell to families, you need to evaluate the expectations of the renters and buyers in your markets to make sure the property meets their needs.
- You are advised to step away from your own area. Many times when your local market is having a downswing in real estate, other communities in neighboring states, or possibly in other countries are on an upswing and prime territory for real estate investment.
- Estimate the total cost associated with buying your investment property, taking into consideration government costs, stamp duty, establishment fees and other financing costs. You may be familiar with closing costs, insurance fees, documentation costs for your area, but when you step outside of your hometown, you must research. Costs can increase greatly in different communities, especially when you venture across country lines.
- It’s important to check your capital growth potential. Find out what direction is the real estate market moving in your targeted community. You will need to project the capital gains you expect to help determine the potential profitability of the property. Evaluate real estate projects which are underway, and how they might affect your purchase.
- Explore your costs when selling a property in any new market. Capital gains taxes vary widely between countries, and sometimes even among different states. This is a critical piece of information in your profit potential.
- Analyze your potential profit margin. For rental property use estimated occupancy levels, and rates to estimate your potential income over the time you will hold on to the property. Will it produce a positive income? Figure out the same for properties you plan to resell. Make an estimate the potential sales price after renovations, and then figure backward using your budget estimates, to determine an appropriate offer.
- Plan your real estate investment for a long term. Many times property becomes the most profitable after you have held onto it for several years. Unless you are buying property for flipping, you are advised to make your plans for a longer duration.
The Bottom Line:
Thinking of buying your first investment property? Following these steps can help you evaluate properties in any location or market conditions, and keep your real estate investments profitable. For more information about real estate investing and its funding, Contact Magna Capital Group, Inc. today at (310) 734 4044 or email at email@example.com.