When dealing with real estate investments there are many steps to go through before investing. Here are my top 10 keys to a successful real estate investment.
1) Education
If you are not experienced in real estate investments the very first thing you should do is to get educated. Take the time to find out what all of the risks are in the investment type you are interested in. Find others that can help educate you on the investment type, which are not involved in the transaction you are doing specifically so there is no conflict of interest. Buy educational material, get connected with online groups and go to multiple seminars in order to continue your education
2) Goal Settings
If you do not have a goal lined out for your real estate investments how do you plan on getting there? Most investors buy one property, or invest based on emotion rather than having a set goal in mind. For example, you could have a goal of obtaining $30,000 per month in passive rental income from your investments through buying single family rental homes and apartment buildings. Your goals should be clearly defined and should include protections and risk mitigation techniques to make sure it is a stable viable plan that can be obtained
3) Building Your Resources
You WILL NOT become a successful real estate investor without resources. In real estate resources include, capital investors, property leads, team members and much more. For this you must expand your relationship base. Real estate is a team sport so if you do not build your network, you cannot build your team
4) Building Your Team
In order to make your investments work you must build your team. Some of the team members you need are Real Estate Agents, Brokers and Bankers, Private Lenders, Appraisers, CPA's, Attorney's, Affiliates, Inspectors, Property Managers and Contractors. There are much more but it's pretty impossible to name them all. It takes quite a bit of time to develop your team and make sure they can be relied upon. Building a team is the most important aspect of investing other than your due diligence on the investment itself
5) Due Diligence
Before investing in any real estate asset your due diligence is crucial. You need to analyse the market your investing in, the market timing relative to that market, the specific neighborhood, the market value of the investment, the cash flow it produces, the rental income it should bring in, all of the expenses related to the investment and much more.
Inspections should be done as well as review of all of the backup documentation such as leases and contracts. Think like an auditor, review all of the backup information provided by the seller and verify it with an outside source as much as possible. I hear horror stories all the time about how people lost money in real estate. After inquiring as to what happened I can say that 99% of the time the investor did not do or know how to do the right due diligence on the investment in the first place.
6) Property Management
Property management can make or break your investment. If you do not have a competent property manager that actually cares about your investment and your success you will have a losing investment.
Most managers are bad at some of the basic management functions such as accounting, rent collection, tenanting, leasing and background checks, repair calls and taking care of the tenant. By far the most important and biggest problem is communication with the owner of the property.
Communication is crucial because without communication the investor cannot make decisions regarding the investment and lack control. Property management also needs to be structured based on performance, meaning, they get paid if it's occupied only, not when it's vacant and there are incentives in place to optimise performance.
7) Marketing
If you do not know how to market for property, capital, property sales, and resources you will not be successful in real estate. Marketing and sales is one of the most important parts of any business.
During economic problems and recessions most companies cut back on marketing when it's most important to increase your marketing efforts. If there are less investors, buyers, and resources available because of the economy, there is more of your competition going after your resources. So in order to attract those resources before your competition you have to market more.
Marketing and sales is a business all in itself so getting educated on marketing strategies is imperative to your success. If you do not understand it or start to learn about internet marketing you will not gain the market share you deserve and will not be as successful. 85% of buyers go online first for investments.
8) Treat Your Investments As a Business
Most investors buy one real estate investment and do not fully utilise all of its capabilities from a business perspective. If you own one property or 50+ properties you should be treating it as a business. Be sure to keep track of ALL of your expenses related to the investment, the due diligence you did, travel costs you incurred, etc so that you can get a deduction for those items against income from other sources.
These types of expenses can happen annually and a percentage of your personal expenses can be used as a tax loophole in order to deduct more against your active income from your job. Your biggest expense in life is your taxes. It is the government's job to find more creative ways to tax us. It is our job to find creative ways to legally not pay taxes. If you are not winning against the government, start to educate yourself on key tax saving strategies.
9) Legal Protection And Tax Structuring
It is crucial that you protect yourself from financial predators. There are people out there that will sue anyone they possibly can. It's really important to obtain insurance or put your assets into a proper entity so that you are not liable in frivolous lawsuits.
Please consult your individual tax advisor to go over your specific situation. Also be sure to keep yourself separate financially from the investment or entity you hold the investment in so that you do not pierce the corporate veil. If you co-mingle your funds there is a very real possibility that in court your legal entity protection that you worked so hard to setup is worthless.
10) Investing In Sustainable Investment Types
Invest in asset types and real estate investments that are sustainable in the long run. Look closely at the cash flow included in the investment.
Flipping can be much more dangerous than investing for cash flow because you typically have a payment on a flip investment that is not covered fully by the rental income and if you get stuck with the property you find yourself in a negative cash flow situation and can only sustain as long as you have money in the bank that can make that payment. Many people lose a lot of money trying to flip property, not knowing fully what they are doing and the risk they are taking only to lose a significant amount of money.
On the other side when you are investing for cash flow only invest in quality assets. Typically if you invest in low end assets in your market you get low end tenants also. What I consider a low end tenant is someone that does not pay the rent on time if at all, causes damage to your property and is a nightmare to deal with. This happens quite frequently in low end property for a particular market.
You want to invest in quality long term assets that are going to produce positive monthly cash flow and make you a great return on investment after you have been conservative with the numbers. I truly believe if you do these things along with increasing your financial IQ you will be successful if you work hard for it.
Most of the wealthy individuals in the world work hard for their money and are constantly evaluating their financial situation and investment goals. Putting a personal budget together and reviewing it monthly, creating additional income sources, implementing tax savings strategies, protecting your money from financial predators and constantly educating yourself are the keys to becoming wealthy.
Article Source: https://EzineArticles.com/expert/Mathew_P_Owens/916588 © 2021
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