9 Things to Consider Before Investing
Becoming a real estate investor doesn’t happen overnight. Only through experience, insight, and knowledge (and quality hard work) can an individual truly start to make money from buying and selling properties. Being a real estate investor is foundationally about learning from past mistakes and honing in on a buying strategy that can align with your long-term goals.
To help with this journey, our skilled property investors at Oak City Properties have taken the time to compile a list of investment tips and mistakes to avoid. Let our experience help you create and develop a successful real estate investment career.
1. Avoid Bad Financing
If you can’t pay cash for your investment, have a sizable down payment and acquire a fixed-rate mortgage. Watch out for high interest rates, adjustable interest rates, and high monthly payments.
Make sure you have the financial flexibility to make payments on your future investment and a backup plan if needed. Think about the following questions and be honest when you are crunching all of the numbers.
- How much will the property potentially cost?
- What is the mortgage payment?
- How much is insurance?
- What will the repair costs be to fix the property?
- What are the ongoing maintenance concerns?
- How much will I pay in taxes?
- How much will I be able to charge each month for rent?
2. Don’t Negate the Research
To earn a profit, you will have to take the time necessary to learn everything about the market and the property you want to purchase. Make sure to:
- Research the local market to be 100% sure your purchases will turn a profit
- Drill down into home values and supply/demand issues in the area you are interested in buying
- Look into the market trends and levels of inventory in the area
- Think about your future tenant’s needs and wants. What amenities will they want close by and how much will they be willing to pay?
- Look into the history of a property (zoning laws, flood zones, potential problem areas, school district rezoning)
- Don’t overpay for the property- pull comparable homes in the neighborhood and consider the return on your investment. What is a realistic price and what is your potential budget?
3. Take Time to Research Repair Cost
Renovating a property is an expensive task. Always do the research to get the best estimate on the budget needed to make necessary repairs. The last thing you want is to overextend yourself by purchasing a home that is outside of the budget. When that happens, you run the risk of dwindling funds and having a unit that is uninhabitable.
No tenants = No cash flow
4. Don’t Underestimate Maintenance Costs
General upkeep on an investment property is an ongoing process. Whether you purchase new construction or an older property, there will always be maintenance issues that come up out of the blue. Roof repair, HVAC stops working, water leaks…the list can go on forever.
The best advice is to make a list of all monthly costs for the home and add in a little extra to cover any unforeseen expenses when it comes to maintenance. Determining expenses prior to purchasing the property is critical to making a profit that matters.
5. Watch Out for Bad Tenants
No one wants to hear about those pesky tenants that never pay their rent on time or ruin a property…but they are out there. If you have a mortgage payment each month, the rent needs to be paid on time so you do not default on the loan. Make sure to use a thorough screening process to find tenants that will take care of your property.
6. Keep an Eye Out for Horrible Insurance Policies
This mistake goes along with bad tenants. If a tenant takes advantage of your rental property, the insurance policy may not always work in your favor. Always check with your insurance policy to see what they do and do not cover. It is worth the extra money to know that you will be covered no matter the situation.
7. Choose Your Contractors Wisely
Finding a qualified contractor is the key to getting the work done well and in a timely fashion. When hiring a contractor, there are a few steps you can take to make sure you are getting the best company/individual for the job.
- Do the research
- Ask for references
- Ask for credential and certifications
- Meet with the contractor
- Discuss every aspect of the project
Take a look at the following article for more information — A Qualified Contractor is Key
8. Make Sure to Have a Sound Plan
Planning as you go is an inexperienced move. Every real estate investor needs to have a short and long-term plan for each property and their business. It is extremely important to have a plan and stick to it. Don’t make decisions based on emotions and visions of grandeur but rather stick to the facts. The last thing you want is to purchase a property that you can’t afford or don’t have any clue how to move forward.
9. Don’t Go In Alone
Doing everything alone is another rookie mistake that property investors often make. Many think that this adventure is a solo one, but that is not the case. Take the time to get the help you need and make the process less stressful.
At Oak City Properties, we’ve streamlined the experience of purchasing and owning investment properties through a trusted and reliable mindset built on decades of measured success. Our real estate and investment professionals are ready to help you manage your most significant assets through a hands-on approach that focuses on consistently generating results.
Want to learn more about our commitment to effective real estate investing and property management? Contact us or give us a call at (919) 232-9222. Feel free to also check out our website at oakcityproperties.com or check out our Facebook Page.
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