There comes a point where “location, location, location” is no longer appropriate for real estate advice. We understand this – you need real advice to help you achieve your real estate investment goals. You can increase your chances of a real estate investment return if you prepare before you get down to business.
Tips for finding the first 5 properties
Real estate investments can be a dynamic addition to your portfolio. Let’s take a look at how newbie investors can scale up their property holdings prior to owning their first five properties. Although we will focus more on residential real estate, most of this information also applies to commercial real estate.
Find a rehabilitation center with potential
For your first property, choosing a rehabilitation project is not a bad idea. These will be houses that are generally in poor shape and need major repairs. This can be anything from wood renovation to air conditioner replacement. And the best thing about these properties is the price tag. The owners are ready to quickly get rid of them without wasting time on their preliminary repairs.
But just because you bought property at a reasonable price doesn’t mean you should overspend on rehabilitation. Estimate in advance how much you will have to spend before buying. The more you do it yourself, the cheaper it will be. At the end of the day, just make sure you come out on top.
Choose the right community
When it comes to choosing a rehab center, it looks like the location clue is still pretty reliable. All in all, you want the worst home in the best neighborhood. But as far as serious investments are concerned, now we are unable to restrain ourselves. Whether you are investing in residential or commercial real estate, you should find an area that has important flags like these:
- Growing population
- Affordable higher income jobs
- Diverse population
- School systems with high scores
In other words, you will need a dynamic area with a growing demand for real estate expansion. This could be a university campus or an emerging hotspot that attracts investors.
Bet on alienated houses
Unless you have a lot of cash, you will likely avoid well-established regions like Silicon Valley, where the housing market is spiraling out of control. Climbing the corporate ladder can be difficult in these mature markets. But this is optional. Buy-back homes in these communities may be your best bet.
A foreclosure home is usually sold by a bank after the owners cannot afford the payments. This often happens when people buy a home outside of their budget. But that means you could be paying a lot less for a much larger home. These sales are often auctions and are usually “as is” purchases.
Choose a reliable management company
After you put the finishing touches on your top, it’s time to let this money hole start making money. You can rent out your property to cover the cost of your monthly mortgage payment and make a profit.
But as a homeowner, you have responsibilities. Once you find someone renting your property, you will need to check their references, check your credit history, and ask for collateral. There is a lot between maintenance, residents’ complaints, lease violations, and eviction.
If your budget allows, consider having a property management company take care of your property. This saves you the trouble of driving through town at 3am to fix a leaking toilet. Here are a few questions to ask the management companies you are interviewing:
- What’s in your current real estate portfolio?
- Do you offer marketing and leasing services?
- How do you determine your rental rates and allowances?
- Do you conduct property checks?
- Can you tell me about your service staff?
- May I see a copy of your maintenance preparation checklist?
- What are your pet policies and fees?
- How often do you send updates on the terms of the property?
Refinance your investment
After a while, you should have a share of the property that you can convert into cash. Between that amount and the profit that you save from the rent (you saved it, right?), You can set aside for the down payment on your second property. The combined profits and equity from the first two properties will be used to fund your third, and so on. Keep repeating this process for every property you purchase.
The tips we have looked at offer investors a relatively cheap way to enter the real estate investment market and increase the capital you hold in your property as you make improvements. Remember to make decisions based on the long term market conditions. After all, thorough research is the key to a successful real estate investment.