A lot of investors (both more or less experienced ones) decide to put their money into real estate because they know how lucrative it can be. However, that doesn’t mean that this endeavor doesn’t come with certain risks.
Just like with any other type of investment, you’ll be facing a lot of challenges and hurdles along the way, which may cause you to lose your motivation to further pursue this, and eventually give up.
But that’s definitely something you shouldn’t do. Instead, you should rely on the expertise and experience of Stephen Vick who has a plethora of experience when it comes to property investing, and today, he is ready to share all his knowledge, tips, and tricks that can help you out on this journey. So let’s see what he has to say!
First, Ask Yourself Why?
Property investment is undoubtedly very alluring and potentially profitable, which is one of the main reasons why so many investors decide to give it a try. However, that doesn’t mean that you should go in it blindly.
For starters, before you take any further steps as far as this is concerned, you need to ask yourself why you want to do it in the first place. Bear in mind that property investment isn’t just a random thing you do on a regular basis.
It is, in fact, a very complex thing, that is also very risky, especially knowing the fact that you may lose some money if you’re careless. Even the smallest mistake may cause you not to get the returns you’ve been wanting.
That’s why you first need to figure out whether this is something short-term or long-term, or maybe even both. Do you simply need fast cash for certain purposes, or are you aspiring to have a stable source of income?
Whatever the situation might be (in terms of your goals), it’s important to answer the “why” question and then move on to the other steps of this journey. If you need a tool that’s going to help you be crystal clear when it comes to this, then you can simply develop a thorough rental property business plan so you can properly define your goals and focus on various strategies.
Seek Advice From A Professional
This is particularly important if you are just getting started as far as investing is concerned. If that’s the case, then according to Stephen Vick, you should definitely make use of a financial expert. As stated previously, you shouldn’t be taking investing lightly, otherwise, you’ll head into a downward spiral.
In these types of situations, when you are ready to invest some serious cash, it would be advisable to first seek advice from a financial expert because they are going to help you not only define your goals but accomplish them too.
For starters, you should sit down with this person and openly discuss your financial dreams so that both of you can determine what needs to be done to convert them into achievable objectives.
Keep in mind, that, after all, these experienced financial professionals are here to be your navigators, developing the course of your investment journey. With their assistance, you’ll be able to craft numerous, diversified investment strategies and tactics.
You Must Do Your Homework
Every even remotely seasoned investor will tell you that you cannot expect any major success and progress if you embark on this journey without first doing your homework. That’s just not how things work in the world of investing.
You simply must have an in-depth knowledge of the markets that piqued your interest, and above everything, stay updated on the latest trends. This means that if there are any changes in the markets, then you must be familiar with them.
When we say this, we refer to important things, like mortgage rates, consumer spending habits, unemployment rates, etc. Why does this matter so much? Well, by getting familiarized with the latest trends and alterations, you’ll be able to foresee when future trends may change, and simultaneously, work on developing exciting, new opportunities for yourself.
Of course, none of this would ever be possible, if you first do not do your homework and learn everything there is to know about a particular area of the real estate market. That’s something that Stephen Vick always emphasizes.
He is here to remind you that you must get all your facts straight concerning a particular market before you invest in it.
Don’t Forget About Your Upfront Expenses
If you are just getting started when it comes to investing, then it’s of huge importance to know your upfront expenses. When we say this, we do not refer solely to the expenses that are related to the property, along with the realtor commissions.
Bear in mind that you’ll be having lots of different costs, such as the ones that are intended for the repairs. A vast majority of the newbies aren’t entirely aware of these things, which is why they frequently do not have the slightest idea how to properly estimate their expenses that are intended for things like repairing electrical issues, cracked foundations, pest infestation problems, and many others.
Now, don’t you think that these problems can easily and quickly be fixed? In fact, most of them not only require time but the expertise of a professional, which means that you’ll have to set aside some cash for that as well.
Aside from all these expenses, don’t forget that you’ll have to spend some money on utility and insurance costs, closing costs, etc. As you can see, this isn’t something that you can easily figure out, hence it would be smart to take some time to calculate them the right way.
Be Careful About The Timing
If you would like to be successful in this endeavor, then you must get familiar with the local market. In fact, it’s much more important than to know everything in regard to the international market.
In these instances, you must be very wise and diligent and avoid purchasing at the top market price. Based on his vast experience when it comes to real estate, Stephen Vick thinks that you should definitely avoid markets that are extremely hot.
Although there are investors who think that it is a generally great idea, bear in mind that you’ll be at high risk of losing a substantial amount of money if you opt for hot markets. So what are you supposed to do then?
Instead, you should focus on the markets that are currently in the expansion phase, where affordability is relatively solid, construction is low, and prices and sales are rising. Another thing that you should prioritize is the location of the property you want to invest in.
The ones that are worth every penny, are normally the ones that are in areas with high population density and have all the necessary amenities in the near vicinity. In other words, you should choose the neighborhood that has:
Low crime rate
Access to parks
Excellent schools
Access to the hospitals (or any other healthcare institution)
Family-friendly
It is close to the public transportation
Access to coffee shops, restaurants, shopping malls, and other popular places
Great walkability
Focus On Hunting Down The Right Type Of Investment Property
Just because you’re a real estate investor, it doesn’t instantly mean that every type of property is your perfect match. On the contrary. In these instances, the one-size-fits-all rule simply doesn’t apply.
Instead, you should focus on selecting the real estate that aligns with your financial goals. When it comes to this, there are three sorts of properties you can select, and they include multifamily buildings, single-family houses, and condominiums.
If you aren’t too familiar with them, then just keep reading because below we will provide you with some information concerning them:
Single-family homes – These are normally used by long-term tenants who are searching for something stable, like roommates and families. They are generally a good option for investors because they’ll be provided with a stable and consistent source of income. Are there any drawbacks to them? Well, relying on one tenant only means that vacancies can take a toll on your budget.
Multifamily buildings – When we say this, we refer to apartment complexes and duplexes. Here, everything revolves around the volume, meaning that you’ll be able to receive several rent payments simultaneously from a single address. But just like single-family homes, these also come with certain flaws. Namely, in these instances, you’ll be dealing with heftier upfront expenses and management that’s a bit more demanding, however, if this doesn’t bother you, then it definitely means that multifamily constructions are the perfect option for you.
Condominiums – Also known as condos are usually most appealing to the younger, ambitious generations who are already very successful. A good thing about condos is the fact that they do not require a lot of maintenance and it’s all by virtue of the homeowner’s associations which cover their communal areas. Any drawbacks? Well, that’s the case with condominiums too. Namely, they’ll take a certain fee for the maintenance, plus, they have specific rules which many landlords may find too strict and limiting.
Now, that you are familiar with the most common types of real estate, your next step should be to pick the one that seems most appealing to you. That’s one of the surefire ways to get closer to financial freedom.
It Wouldn’t Hurt To Have An Accountant
As an investor of any type, you’ll be dealing with numerous expenses on a yearly basis. Keep in mind that you must get your facts straight concerning the tax laws, which are generally very complex and difficult to understand unless you’re an expert.
Not to mention the fact, that they can also be very time-consuming. That’s why it would be smart to put your trust in the hands of an experienced and knowledgeable accountant who is going to handle your business books.
You may think that something like this is going to be very costly, however, don’t forget that these expenses are nothing in comparison to the ones you could have if you decide to tackle them all on your own.
At the end of the day, this is an investment that’s going to serve you in the long run and is certainly worth every penny. On the flip side, if you do not retain the services of a reputable accountant, you may jeopardize your investments.
You Must Learn How To Manage Your Risks
There are a couple of ways you can manage the risks that are associated with the property investment. For starters, you shouldn’t go too deeply into debt. Once you decide to purchase an investment property that’s intended for sale, you must aspire to put at least ten percent down.
Of course, if you put twenty percent, that’s even better because it eliminates private mortgage insurance, and frequently yields a much lower interest rate on your loan too. Another thing that you’re supposed to do is to maintain a huge money reserve.
By doing so, you will decrease the risk of having to sell real estate as soon as possible at a loss if you must have the money to carry the real estate long before it needs to be moved. Those who have a huge money reserve, always have money on hand for various repair bills before they can put the property on the market.
In a nutshell, managing your risks is always advisable and is something that’s going to turn you into a successful real estate investor. Another thing that you shouldn’t do is fall in love with a particular property, because, at the end of the day, you are not going to be a person who’s going to live there, and also, you need to be aware of your risk tolerance.
It has been proven so many times in the past that investing in real estate can truly be profitable, however, if you want to ensure you stay on the right track, then you must listen to everything that Stephen Vick advised you today.
Read more:
Stephen Vick’s Guide to Effective Financial Tactics in Property Investment
