Investing In Real Estate
Investing in real estate has always been a great way to diversify your income, protect your money and earn more. Investors have many reasons for investing whether it is for residual income, preparing for retirement or for disposable income. Whatever the reason, understanding the basic principles behind successful property ownership is key. Owning a home and an apartment building require different skills and its important to understand the differences between the two.
Reasons to Invest
Many reasons people choose to invest in real estate are:
- Steady income stream for a long period of time
- Growth in net worth through the increase in property value
- Potential tax write-offs to lower your tax obligations
- Security through the ownership of a fixed asset versus the market
- Diversification of your investments
- Multiplication of your sources of income. Earn money while you are away
First Time Investors
Some tricks of the trade are vital for first time investors. Its important to focus on your first investment in the following ways:
- Choose a property in a good area close to your home if you are preparing to self manage the property
- Don’t purchase too large of a property. Start small. Limit your risk and your exposure
- Control your situation by limiting your liability. Consider establishing a holding company
- Insurance is key, work with a well qualified insurance agent to find you the best coverage for the best possible rates
- Finding good financing and favorable financing through local banks, hard money lenders, family or friends
- Work with a broker to help guide you through the purchase process. It is important to complete extensive due diligence to ensure the investment you are making is sound
- Ask around. Who else around you is already an investor? What advice can they offer you having already completed their first deal?
As a seasoned investor it often times becomes a numbers game. Looking for the best deal in an up and coming market is always a great way to grow your net worth. Some thoughts to keep in mind:
- Property Appreciation in certain areas and how it may positively or negatively impact your entire portfolio if the expected does not happen
- Local market & surrounding real estate values
- Future property potential, are rents at or below market rate? Could they be higher? Be sure to complete your due diligence on market rates surrounding a potential investment.
- Could the renovation of a property result in a more valuable and more profitable investment?
- Execution of the BRRR (Buy, Remodel, Rent & Refi) model could result in larger and faster returns.
- Are you partnered with the right people?
- Growth of your portfolio – are you protected, control your liability and your growth. Don't let rapid growth put you into debt and a difficult cash position
- How much, is too much? When do you need help managing your growth and your portfolio?