Real estate can present an excellent investment opportunity for those with the patience to stay in the market for a while. As the economy fluctuates, so does the real estate market – but in the long term, you can rest assured that your property will likely pay off in profits. Once you’ve got your financing in order and know what your general business plan, you are left with one pressing question: how will you decide what properties to invest in?
We have some helpful advice to assist your decision. Read through our guide for some quality tips on how you can choose your next property investment, what types of real estate deals you should keep your eyes open for, and some things to keep in mind when you’re getting started with your investment career.
Tip #1: location, location, location
It’s easy to get caught up in the features of a property you want to buy. Seeing newly renovated bathrooms, finding a contemporary kitchen, and encountering state of the art plumbing make investors’ eyes pop with glee. But before you get too excited, it’s important to remember that the location of your property is highly important.
One rule we like to abide by is that the worst property in the best neighborhood is better than the best property in the worst neighborhood. After all, you have some control over how nicely you can renovate the property after you purchase it, but you have no control over what the rest of the neighborhood might do.
If you find a fixer-upper in an up-and-coming neighborhood, your instincts should tell you that that it’s a good opportunity. A little TLC and renovation later, and you’ve got yourself a massive profit.
Tip #2: Keep your horizons wide
When most real estate investors get started, their first thought is that they should buy a unit in a condo complex or a house to flip and sell. While these can be great options, they’re by no means the end of the story. You may want to find commercial real estate to invest in to diversify your portfolio. Sometimes, commercial real estate doesn’t need nearly as much renovation as a residential home, and you are sure to make significant returns if the business that occupies your property is successful.
Don’t miss out on great opportunities like leasing advertising space on billboards and benches, or purchasing land that developers may want to build on. Real estate is a diverse industry, and it’s a shame to constrain yourself to only a certain corner of the market when there’s so much profit to be had across the spectrum!
Know when to cut your losses
We’ve known far too many investors stick with a sunk cost just because they’d already put so much work and money into it. Just because you’ve lost money doesn’t mean you have to lose even more money. If you see that your investment is tanking and you don’t think there’s a good chance for recuperating your funds, it might be time to sell at a lower price.
For example, say you’ve bought a house to flip and rent. However, soon after your renovation is finished, rent prices in the area take a nosedive. Suddenly it looks like you’ll never be able to make back the money you spent while collecting the meager amount from rent you can expect. It might be time to sell the property instead of holding onto it and losing money on property taxes and continued upkeep.
A good investor knows when it’s time to double-down and when it’s time to cut their losses. Figuring this out is a fine balance, and often takes years of real estate experience, so don’t beat yourself too much if you make a mistake early on in your real estate investing career.
Real estate can be a lucrative and rewarding investment to make. With so many options, you’ll be sure to find something in your budget and that suits your portfolio’s needs. Remember, the most important tip of all is that patience is a virtue. The most successful real estate investors are those that know it can take time to see returns on an investment. Good luck, and have fun on your real estate adventure!