9 Important Factors When Starting Out In Real Estate Investment
Getting started in real estate investment is an exciting time, there’s plenty to learn, and the potential to make a substantial amount of money. Regardless of the positives, there are many important factors to consider, if you’re looking to be successful. To help you navigate the initial stages, here are some of the key factors to think about.
- Determine Your Strategy
There are two options for making money in real estate, one of which is rental properties. First, you get a buy- to- let mortgage, and next, you rent out the property for a profit. The second option is property flipping, which involves buying a property and then selling it for a profit. Prior to the sale, you’ll usually need to carry out renovations, to add value to the property.
The strategy you choose will depend on your personal preferences, and the skills and expertise that you have. For beginner investors, rental property projects are often the more straightforward option. To approach property flipping you’ll need a great team behind you, and a little more planning. Having said this, property flipping is perfectly achievable for beginners, (if you’re willing to put in the time),
2 . Location Of The Property
Determining the right location is one of the most important aspects of real estate investment. All the unique selling points of the neighborhood play a part here, whether it’s amenities, local transport, schools, scenic places, and so on. When you’re deciding on the location, it’s vital to keep your target tenant in mind, considering what’s important to them.
Figure out how the area might change over your investment period. You can do this by contacting the public agencies who are responsible for urban planning. For a range of properties in some of the most desirable locations, take a look at New Providence Real Estate.
- The Real Estate Market
You’ll need to conduct thorough research into the real estate market before you approach an initial investment. It’s normal for markets to fluctuate, so you’ve got to be aware of the latest trends. It’s useful to stay in the know about mortgage rates, foreclosures, flipping, new builds, and property market prices. A few resources that might come in handy include:
- Realtors: This is the official publication from the National Association of Realtors, here you’ll find news in real estate, data, and the latest trends.
- National Real Estate Investor: This magazine is the leading resource for trends in commercial real estate. It’s a useful publication for brokers, investors, property managers, and real estate companies.
- Property Valuation
The property valuation is an important factor in real estate. Many aspects of the process rely on the valuation, whether it’s insurance, investment analysis, financing, taxation, and listing price. Several valuation methods might be used, for example, the income approach. The income approach is based directly on your projected cash flows and is a great option for rental properties. A property valuation can also be approached by sales comparison, meaning that the property value is determined by the prices of similar properties.
- Existing Or New
You’ll need to consider whether to invest in an existing property or a brand new construction. When you choose an existing property, you’ll benefit from more convenience and the potential for lower costs. A new construction means more modern features, and the freedom to customize the property.
When you’re making this decision, you’ll need to take a close look at the property surveys, deeds, and appraisals. For a new build, you’ll need to establish the reputation of your chosen construction company, (looking into their past projects). Draw up a breakdown of the costs, from taxes to maintenance.
- Consider Your Ideal Tenants
If you are planning to rent out your property, it’s important to determine which kind of tenants you are targeting. Understanding the needs of your tenants will ensure that your projects are successful. If you’re targeting families, consider the schools in the area, and how family-friendly the neighborhood is. Perhaps instead you’re targeting students? If so, you’ll need to think about proximity to the university, and how affordable the area is.
- Management Processes
When approaching a buy-to-let investment, you’ll need to consider how you are going to manage your property. There’s the option to take care of the management yourself, or you can hire a property management company. A management company can streamline the process, supporting you with the advertising, tenant screening, contracts, and maintenance. With the help of a property management company, you’ll generate a passive income, without having to involve yourself in too many landlord duties.
- Adding Value
If you chose the property flipping route, you’ll need to consider how you can add value to your property. There are plenty of ways to boost the value, including:
- Transform the cellar or garage into a living space.
- Build a kitchen extension or a conservatory space.
- Consider a loft conversion.
- Improve the exterior and curb appeal.
- Modernize the bathroom.
- Add modern amenities.
- Green features, for example, solar panels or smart heating.
These are just a few ways you can add value to a property, however, many properties won’t need such extensive work. When you’re starting it can often be better to choose a property that does not require extensive renovations.
- Budget Your Costs
When approaching any real estate project, it’s essential to budget your costs properly.
Costs range from upgrades and maintenance to utilities. You’ll also need to pay third-party companies (for instance property management companies).
If you’re taking out a loan, it’s also vital to consider your REITs. Real estate investment trusts are services that own or finance real estate. It’s only by having a solid understanding of the costs involved that you can predict your profits, and make sound financial decisions.
Over time, you’ll build up your portfolio, and you might choose to approach both flipping projects and rental projects. Having a diverse portfolio is a good way to reduce risks and build up your real estate experience.