Picture this: You’re on vacation in the Hamptons and you stumble upon a quaint beach house with a million-dollar view. Oh, and it just happens to be for sale. “This would be a perfect investment property!” you say to yourself. You’re totally jazzed about the idea of owning a little slice of paradise you can rent to indulgent tourists. It truly sounds like the perfect plan. That is, until you realize the million-dollar view comes with a multimillion-dollar price tag. Suddenly your idea doesn’t seem so brilliant.
Anyone can be a real estate investor, but it requires a special set of skills to become a successful real estate investor. Whether you want to buy a property and rent it or you plan to flip a home and sell it, becoming a top player in a competitive real estate market is no easy feat. Before you dive into buying your first investment property, consider these five tips for becoming a super savvy real estate investor.
Find a mentor. Work your network and get in contact with someone who is well established in the real estate industry. An experienced agent will be able to tell you the values of the properties you’re considering, and will also have contacts for everything from financing to renovating.
Study the local market. Expert real estate investors work hard to acquire an in-depth knowledge of their chosen markets. Keeping current on consumer spending habits, the local unemployment rate, and plans for future developments will allow you to make sound business decisions.
Develop a niche. Top real estate investors know it’s better to do one thing really well than to do several things inadequately. Instead of trying to be good at everything, focus on one area, such as buying HUD properties, and work at becoming an expert in that area before moving on to tackle new opportunities.
Hire a reputable accountant. Taxes can get complicated for even the most experienced real estate investors. The cost of hiring a professional accountant to handle your books is insignificant compared to the savings he or she can bring to your business. Keeping detailed records of all your transactions will be key, too.
Think long term. Ask any real estate investor what her biggest expense is and she’ll likely say “vacancies.” Tenant turnover is pricey even if you’re able to get someone new to move into your property right away. Consider offering a discount on rent or free HBO if your tenants agree to a two- or three-year lease.
Despite what you may have heard about real estate investment as an easy way to get rich quick, it’s actually a challenging business that requires a high level of focus and planning. Investing in real estate can be a great way to generate extra cash flow and build wealth slowly over time, but only if you surround yourself with experienced industry professionals, develop a niche, and build out a long-term plan for success.
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