Avoiding the Risky Business of Real Estate
A lot of people start plans to invest in real estate because they are under the impression that they are onto a winner. And it’s not much of a surprise when you consider the huge rise in house and commercial properties over the past few decades. But as the last financial crisis taught us, there is no such thing as a guarantee when you invest in real estate. And there are plenty of issues that you must watch out for if you want your investment to end up growing rather than shrinking. Let’s take a closer look at everything you need to know.
It’s mostly about you.
First of all, it’s important to understand that your success in real estate investment is largely down to you. Ultimately, it’s your responsibility to do your homework, learn the market and ensure you don’t buy a duff property that could ruin you financially. And if you are negligent as an investor, not only can it cost you a fortune, but it can also result in you ending up in serious hot water. So, as to whether or not real estate is a risk – it’s all on you.
Get the homework done.
OK, so let’s move onto the practical things you can do to make sure that your investment is a low risk rather than high risk. As we discussed above, your first goal is to hit the books about property, find out about how the markets work, and even get in touch with other local property buyers and speak to them about your goals. Seriously, it’s well worth your time and will help you avoid some costly mistakes. There are classes out there in virtually every town – or online, of course. And the more you educate yourself, the more chance you have of success. And if you have the money available to buy a property or two, there should be nothing stopping you from investing in your personal education, either.
Go it alone or build a team?
Serious property investors aren’t just guys or girls that make it alone. They have teams of people behind them and buying that kind of expertise lessons your risk significantly. You might need a team of Realtors on hand to help you find a suitable property. You will need to know home inspectors to ensure you aren’t buying a dud. And you will also need to build up close relationships with lenders, contractors, mortgage brokers, and construction teams if you want to taste any kind of success. And vetting these people will make a big difference, too. Get recommendations from friends and family, hold interviews, and also do your own homework to ensure you know a good company from the cowboys.
Can you actually do this?
Before spending a cent on your property project, be realistic with yourself. As pointed out over at https://www.vystal.com.au, there are many areas of real estate investment that will be critical to your success, and you have to remember that the best property investors sometimes work on their portfolios full-time. Is this something you could do? Do you have the nose for a bargain, or the chops to go into a run-down property and fix it up? Can you manage people? If not, think carefully about diving into a project of this scope, or you will end up spending money in the wrong places and increasing your risk of failure. There are some ways out if you really don’t have the skills to do everything alone, of course – hiring a project manager, for example. But when you are just getting started, you ‘ll need to go through the financial side of things with a fine tooth comb to ensure you can afford it.
Do you know the market?
Location is everything when you are getting into property – no matter whether it’s a holiday home, a business building, or residential real estate. And nothing is more vital than understanding the local market before buying a new slice of the pie. You have to be diligent – particularly when just starting out. And while the dream of any real estate investor is to buy at a knockdown price and sell for a considerable profit, the reality is that these kind of sales are few and far between, especially when you are a beginner. So, get to know the market of the area you are buying in. Investigate local state development plans to spot public investment in particular areas, to make sure that you can buy cheap and sell for a profit. And be careful not to over-leverage – be responsible with every purchase and ensure you can survive if anything goes wrong. Which brings us nicely to our next point…
Only invest what you can afford to lose.
As with any other investment, it’s vital that you can afford to lose the money you spend – completely. You will need a strong income when entering the field, for a start – perhaps working full-time while your new investment career takes off. And you should also have considerable savings behind you – at least enough to last you for six months in the event you were to lose your job. Like it or not, real estate investment is something of a rich person’s game, and it’s vital you have a large, comfortable cushion to fall back on if the market tanks and your property or properties start to lose value.
Know your tenants
Finally, as discussed at https://www.crowdstreet.com/, you need to have a good idea of the type of tenants you want to attract – because they are a huge risk. A non-payer, for example, can end up costing you a small fortune – you’ll have to pay for your entire mortgage and might even need to pay fees to try and evict them. Look at creditworthiness, check their capability of paying a regular rent, and give them a full interview to find out if they are suitable for the property. You don’t have to accept anyone as a tenant, but once they move in it can be difficult to move them on if you decide you don’t like them.
Good luck – and make sure you limit your risk!
