1. Choosing Your Market & Timing The Investment Wisely
For successful real estate investment, it’s more important to know your local market than just what’s going on nationwide. You have to be wise in so you don’t buy at top market price. Your purchase and its success will be most influenced by the factors at work in your specific real estate market. A good rule of thumb to become successful in real estate investing is to avoid very hot markets. Some real estate investors here may brag about the appreciation of their properties or rising rates, but you risk buying at the top of the market and losing your money.
The real estate markets move in cycles due to the desire for economic profits, and every real estate market is at a slightly different phase of its housing cycle. You need to find markets that are in the phase of expansion – where sales and prices are rising, affordability is good, construction is low and capital investment is rising.
To become successful in real estate investment, your focus should also be on the location of the property within the market. You need to invest in those neighbourhoods which have high population density, are developing, and have all basic amenities nearby.
All great neighbourhoods have this in common:
Low crime rate
Access to parks and leisure destinations
Access to medical care
Access to public transportation
Access to shopping malls and restaurants
All of these translate into high demand for housing. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.
2. Buy Cheap
Real estate investing can be compared to investing in a dividend-paying stock. The return on investment is based on how cheap you bought the commodity. However, you have to look at the return on the investment. A cheap little house in an unsafe neighbourhood can be bought for little money, but you won’t get much money from it, either. So, instead of focusing on buying a house, focus instead on buying a land or an off-plan. You buy cheap, save money and gain more as the year goes by.
3. Tap into the Hidden Market
The ideal case is buying property from a distressed seller because you can get it way below the fair market value. Look for homes with distressed sellers who haven’t put them on the market yet.
4. Understand The Market
One of the best ways to avoid problems when investing in real estate is to understand the market. Understanding your real estate market will help you to evaluate the price of an investment property. Know how much the typical house in a community is worth per square foot and the rent you could charge for a given investment property. Renovate properties in ways that make them more appealing to the expected buyer.
For example, never reduce the bedroom count in a family-friendly community. Nor should you reduce the size of the closet or shrink the master bath to put in a hot tub few in the area would appreciate. Don’t rip out a good yard to put in a pool if there is little demand for it and also take inflation into account. If you put time and effort into truly understanding your local real estate market, you can significantly improve your chances of becoming successful in real estate investment
5. Maximize Value of Real Estate
Look for ways to maximize the value of the real estate, eking out more profit for the same investment property. It could involve renting out a corner to a bank to install an ATM. You could rent out space in the lobby for a small commissary, generating rental income from what otherwise failed to add to the business’s cash flow. In an apartment complex, you can look for value-added services. For example, offer trash pickup from someone’s door to the dumpster for a modest fee per month.
Or add a concierge or security guard to the building. Now you can charge higher rent for a more attractive property. Another variation of this applies to house flipping. Instead of buying the home, fixing it up and selling it to a home buyer, fill it with a tenant, instead. Once the tenant has moved in with a lease, start looking for buyers. This is called a turnkey rental property, and it can easily be sold to a new investor who wants to jump into real estate investment without any hassles.
6. Consider Non-Traditional Real Estate Investments
Remember that real estate investing doesn’t have to equal a choice between investing in single-family homes and apartment buildings. You could invest in office buildings, storage unit complexes, industrial space, and warehouse. All of these generate rental income. In the case of offices and industrial buildings, you may be able to reduce overall costs with a triple-net lease where the tenant covers basic insurance and pays the property taxes and maintenance. Your investment then yields steady cash flow with few out of pocket expenses.