When it comes to investing, everybody has certain goals and aspirations.
However, we have found that there are certain guidelines every aspiring real
estate investor needs to know:
1. Compare Property Values and
Rents
Financial statistics only go so far; the best measure of a
property's market value is often the sale prices of nearby properties. The same
holds true for area rents. A low price can often be justified by a reasonable
rent; renters who can afford a high rent can afford to buy instead, so
reasonably priced rent is a need.
2. Be careful
Tax
laws may change Don't base your tax investment on current tax laws. The tax code
is constantly changing, and a good investment is a good investment regardless of
the tax code. The right property with the right financing is what you should
look for as an investor.
3. Specialize in something you
Know
Start in a market segment you know. Whether you focus on
fixer-uppers, foreclosures, starter homes, low-down payment properties,
condominiums, or small apartment buildings, you'll benefit from experience by
specializing in one aspect of investment real estate properties.
4. Know the Costs going in!
Know the financial
statements inside out. What are operating expenses? What are loan payments?
Vacancy costs? Taxes? What does the cash flow statement look like? These are key
issues that must be addressed before making a solid investment.
5. Know where your tenants are coming from
If the last rent increase was recent, your tenants may be
considering a move. If tenants have a short-term lease, they may be living there
simply to attract unsuspecting buyers. It is also important to collect the
tenants' security deposits at closing.
6. Assess the tax
situation
Taxes are an integral part of successful real estate
investing, and they often make the difference between a positive cash flow and a
negative one. Know the tax situation, and see how it can be manipulated to your
advantage. It may be a good idea to consult a tax advisor.
7.
Investigate insurance coverage
If seller's coverage is based on
lower-than-current replacement value, your insurance cost may increase when you
pay a higher purchase price.
8. Confirm Utility Costs
Ask the local utilities to verify recent utility expenses, especially if any
of these costs are included in your tenant's rent.
9. Consult
Your Accountant
Taxation is a key element of successful real estate
investing, so be sure to find an accountant who is well-versed with the
constantly evolving tax code.
10. Inspect!
Make
sure that you always perform a thorough inspection of the property before buying
it. Never, ever buy any property without at least examining the site. In some
cases, hiring professional inspectors to examine the structural mechanical
system may be a sound investment
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