Before you venture into any business, it is imperative to take certain steps in order to avoid disappointment and be aware of challenges and risks involved in the business you seek to venture into. In real estate investment, we have listed some of the key and primary things to be put into consideration before you make the decision to buy your first investment property.
Research
The first and major step towards the achievement of any goal is research. You are required to be well informed by doing all the necessary research on the investment you aim to venture into. Ask questions from friends, make research online, seek experts, and get guidance from consultants before you go on. Real estate investing is not passive. There are investment associations in every metropolitan area as well as many online resources.
Know Your Goals
Remind yourself often of why you’re pursuing real estate investing. What investment goals are you working towards? Make sure the property and investment terms meet your objectives. Talk to other people who have done it and be realistic about the time commitment of managing the property.
Start Locally
Start local. Every market has investment opportunities. There is no such thing as a “starter investment market.” Your local market might not be good for rentals, but great for flipping and vice versa. Find out what is working locally and find a professional to help. Be involved in the process! You will gain experience which is very important in real estate.
Keep It Simple
Your first property should be an easy one. Buying a property for a realistic price with conservative leverage and some cash flow is what you want. If it’s a bargain, there’s a reason. The stories about first time-investors getting in over their heads are real. Recognize that you probably have a lot to learn and you want some training wheels for your first ride. –
Plan For The Future
Each investment property should add value to your big picture strategy and get you closer to your end goal. One key aspect to consider is how to weather any potential recession since you will only recognize an actual loss if/when you are forced to sell property. Purchasing in an area’s median price range can be a safe bet, and a quick search can help you determine average rent to cover expenses. When purchasing your first rental property, don’t be tempted to buy a property that doesn’t have cash flow. When rental property hunting, look for a target ROI of 15% or more and target rents should equal at least 1% of the purchase price.
