Keys to a Successful Real Estate Investment

When investing in real estate, there are many different methods across the industry. Everyone seems to have their own idea about what works best for them. However, there are a few key steps—both before and after the investment—that seem to work best across the board. These key steps will help you secure a successful real estate investment.

Before the Investment

Once you make the decision to get into real estate investment, there are few steps that should be followed to ensure you are going to have a good experience.

Education

This is perhaps the most important step you’ll ever follow. Real estate can be a tricky industry for those who don’t understand it, and making a misstep with an investment here can be extremely costly. Utilize friends in the industry, ask questions, read books and blogs, attend workshops—get a good grip on the industry before you jump in.

Goals

Regardless of what you’re doing in life, you should always have a general idea of your goals. Business, in any form, needs goals in order to have a clear, defined path to follow—and real estate investing is no different. What are you looking to get out of the investment? How long are you looking to hold onto the property? What ROI (return on investment) or cash flow are you looking for? Having pre-determined, set goals for your investment will help you when shopping for properties or making business plans.

Network

Before you start shelling out money, take some time to get some resources in place. Believe it or not, you can’t do everything yourself and this is especially true when it comes to starting out in real estate investing. You’ll want some resources at your fingertips to help make the process easier in the long run. Attend workshops and seminars, have mutual friends introduce you to people in the industry, join several forums online.

To make the process easier once it starts, you’ll want to have picked out a few ‘partners’ beforehand. Choosing your CPA, attorneys, inspectors, and so forth ahead of time will help streamline the process and allow you to focus on the property at hand once you purchase, instead of selecting these individuals while under pressure and time constraints. Grabbing a good real estate expert (whether from a regular firm or an investment-only firm) will go a long way in finding the best property for your needs, as well.

Research

While understanding the industry is important, understanding the area you’ll be investing in is vital. Toke a good look at the market averages then analyze the market figures in the area you’re interested in and see how they match up. You’ll want to know the local average rental rates, market values, appreciation averages, and market timing. Knowing the answers to questions like this will help you avoid getting stuck with a property you can’t rent or flip or wind up overpaying for a property versus the market average.

Once you decide on a property, it is important to have the home assessed and inspected. This will help you determine if there are any structural or foundation issues which would not be discovered through your own research. Pairing these reports with your own market research will give you the information you need to make a sound, informed decision.

After the Investment

If you’ve followed all of the above steps and partnered with an excellent real estate agent and/or mortgage broker, then you’re ready to handle the after-math. Securing a property isn’t where the work ends. Now you have to maintain it in order to create a decent cash flow. Here are some key pointers to maintain a successful real estate investment long after the closing.

Renovation and Repair

Depending on the type of property you opted to purchase, you may require the use of a renovation expert. You’ll want to interview several renovation contractors before settling on one. Compare their services, their bid prices, and their manners. Check references, look at their average project completion time, and ask to see their licenses and insurance.

As you renovate, you’ll want to ensure that the project is completed to be structurally sound, but also visually appealing. Focus on areas of the home which would draw in tenants or prospective buyers, such as kitchens and bathrooms.

Property Management

Deciding whether you want to hire a property manager or not is a huge factor, especially for those new to the real estate industry. Landlord/Tenant relationships can be tricky, so having someone guide you along the path that is experienced can sometimes be a lifesaver. A good property management company can do most of the work for you, and are usually worth every penny. In addition to being knowledgeable and experienced in selecting high quality tenants, they will often handle any maintenance issues, rent collection, accounting, and marketing. This is especially useful if you live outside of the area you have invested in.

Keep Track

From one property to fifty, real estate investment is essentially a business and needs to be handled as such. So, it is important to keep track of every penny that has been put into the process. Every expense from light bulbs to a new roof should be documented. This includes any travel costs related to the property and any agencies you hired along the way. These items, believe it or not, can often be claimed as deductibles on your taxes.

Protect Yourself

The real world today can be a scary place. While you may not be out to get anyone, there are people out there who will be seeking ways to prey on others. When you enter the real estate market, you have to prepare yourself for anything in order to protect your large investment. Obtaining additional insurance or creating your investment as a separate entity will help if anyone decides to take up a frivolous lawsuit against you for any reason. Consulting with a tax advisor and real estate attorney in this matter will give you the information you need to make decisions on how to protect yourself.

The Most Important Key of All

Regardless of your experience in real estate, the most important key to remember is don’t be afraid to ask for help. There are experts out there for a reason—don’t lose out because you’re afraid to hire one. One person doesn’t know it all, so don’t hesitate to ask for help from others. Knowing when you’re out of your league is paramount to having a successful real estate investment.