However, you plan to go about your property investment, you should work in accordance with some rules as it keeps you disciplined and keeps the emotions out. Rules also help you strike the perfect balance between risks and rewards. Here is a set of rules that has worked out for many real estate investors over the years. You can use them too!
Know what you want
If you are a newbie to real estate investing, it is natural not to know the trade inside out and it is difficult to learn it overnight. However, you should at least know what you are doing and what you want from your investment. To start with, you should read books on real estate investing and attend seminars by renowned real estate coaches.
It is wise to take one step at a time rather than placing all your eggs in a single basket. First timers should invest in a single-family home or a duplex. You will get to learn a lot on your first deal which you can convert into successful investing strategies for future deals. Do not jump to a second deal until your first deal is completed smoothly.
Treat every deal differently
Real estate investing does not have a one-size fits all approach. Each property is different as it depends on various factors such as the type of property (commercial, residential, development land), the location, the laws, the real estate market and the likes. You should go into a property deal only after understanding its special features and risk factors if you want to make it truly successful.
Be prepared for the worst
As investors, when most people build their real estate investment plan, they focus only on how much profits they can make and how they can do. However, not many consider the scenario wherein things don’t go as planned. Therefore, when you do sit down to plan, make a list of the things that could possibly go wrong and brainstorm solutions for the same. Such meticulous planning increases the success rate. Having a contingency plan is key.
Don’t forget the income-to-debt ratio
Creative financing has made buying real estate properties upfront a lot easier. However, even with methods such as owner financing and subject to, you have to make payments towards mortgage and maintenance after purchase. Thus, it is important to make sure that the income from the property is more or at least covers the debt payments.
Fixed interest rate
If you have borrowed finance to buy the property, opt for a long-term loan with fixed interest rates. A variable interest rate changes as per the changes to the economy and can disturb even a full-proof investment plan.
Get everything in writing
It doesn’t matter who the seller is, a relative or an unknown, get everything down in writing. The moment the deal is finalized make sure you have the right agreement or contract in place.
Choose the right location
Many-a-times real estate investors flock to a particular location due to the rock-bottom property prices. They do manage to get a superb deal, but in the long run it does not bring in much because the investment needs to be maintained.