BUSINESS & TECHNOLOGY — About to embark on your first property investment? Anxious about making a profit? You’ll be happy to know that there are plenty of tried-and-tested steps you can take to improve your chances of success. In this article, we’ll be sharing some ways to become a property investor and make a profit.
Investing in real estate is a great way to build wealth. With a savvy investment, you’ll be able to make excellent returns with a predictable rental income that appreciates over time. The benefits are many, from passive income to tax advantages. So let’s get started!
1. Know Your Market
It’s super important that you get to know your market inside out and back-to-front. This is what will keep you competitive as a landlord in your area. Make sure that you’re up to date with current trends. This will help you assess the market and forecast for the future.
Key factors to consider:
- Interest rates
- Average rent prices
- Average income
- Crime rates
- Employment and unemployment rates
All of these factors will impact your ability to find tenants. For example, you may find a cheaper investment property in a high-crime neighborhood, but this is likely to make it harder to find tenants willing to live there. Being informed is key to becoming a successful real estate investor.
2. Engage the Services of a Professional Management Company
For first-time investors, it’s always advisable to engage the services of a professional management company. A reputable property management company will take the headaches out of managing a property portfolio by maintaining and overseeing real estate assets on behalf of the owner.
Using the services of an experienced management company means you can leverage the benefits of owning a rental property without the hassle. The company will help you maximize the profitability of your investment by taking on tasks like:
- Setting the correct rental rate
- Collecting and depositing rental payments
- Advertising effectively
- Finding and managing tenants
- Accounting and billing
- Managing vendor relationships
- Ensuring compliance with housing regulations and property laws
3. Factor in Unexpected Costs
Something that many first-time investors learn is that costs have a way of cropping up when you least expect. That could be anything from basic maintenance to emergency renovations. Failure to plan for these unexpected expenses can take a serious wedge out of your profits, but as long as you plan ahead, there’s nothing to worry about.
Every landlord needs a contingency budget. Ideally, landlords should look to set aside about 30% of their rental income for maintenance-related issues. Maintenance costs are notoriously unpredictable, however. For people new to the game, it can be hard to anticipate potential issues ahead of time so it’s worth setting aside a bit more (50% may be just right).
4. Prioritize Maintenance Over Expensive Renos
Spending a ton of money on expensive renovations is a common mistake made by first-time property investors. But this is a sure-fire way to eat into your profits. Your unit doesn’t have to be glitzy and glamorous. Instead, set that money aside for more important issues like fixing any damage and tending to maintenance issues before they get out of hand.
5. Network in Your Local Area
Getting started in real estate investing can be daunting for first-timers. Luckily there are lots of ways to get in some much-needed research before digging your teeth into a project. Why not try signing up for a real estate investing group? Here you’ll be able to network and seek the mentorship of other rental investors in your local area. At the very least, consider joining online forum groups for real estate investing, such as those found on sites like Reddit.
Last but not least, it’s important to think ahead – especially if you plan to invest in multiple lots at a later stage. Seeking suitable rental management will be invaluable.
Together with your advisors, come up with a roadmap for your property investment goals moving forwards. This should include a rental strategy, as well as rigorous financial and contingency planning.
With the right support and strategy, even new investors can make a profit. Remember to plan ahead, network like crazy, and refrain from any major renovation projects. This way you’ll build knowledge, cut costs, and set yourself up for success!