Eight Ways New Investors Can Succeed in Today's Real Estate Market
Investing in real estate is an increasingly popular way for entrepreneurial-minded individuals to diversify their portfolios and earn income. It's not the easiest endeavor, and like any investment, it requires plenty of research and due diligence to make it work. But when done correctly, real estate can be an incredibly lucrative business opportunity.
If you're new to the real estate market or are thinking about making your first investment, now is the time to get a jump on learning the latest industry trends. Here is some critical advice to help you on your way to independence:
1. Property Management
The biggest mental hurdle for new investors is dealing with the unknowns that come with owning and managing property. Thankfully in this day and age of communication its easier than ever to remotely manage your property or properties. Set up a good plumber, electrician and other critical services in case you are away, then service is only one phone call away to someone you have vetted already.
2. Give Yourself a Safety Margin
We've been in a bull market for the last seven to eight years, and I would be extremely worried about getting into luxury housing. The key to succeeding in 2017 is to buy defensible assets that allow you a margin of safety, all the while preserving your operations throughout the downturn. That is, plan for the higher value properties to drop. That way if they do, you have enough set aside to cover the carrying costs until the price recovers.
3. Find The Right Locations
Get in front of sellers in the best locations. This is the key to everything and is what our business is built on. Areas of higher desire, such as trendy neighborhoods or easy access get higher rents or higher sale prices then the same property at a different location, so plan your purchase for not only the current traffic but research any future development plans.
4. Get in on the Rental Market
Consider investing in the rental industry for yield, not necessarily capital returns. There is a huge generational shift towards renting among millennials. The larger the amount of units the more you mitigate any vacancy rate, as long as you research desired areas.
5. Educate Yourself On Local Market Nuances
Don't buy in a "new to you" market based on what you know back home. Real estate is local, and local knowledge is critical with regional nuances. Find someone who is not only intimately familiar with your target area but charts personal experience as an investor. The best guesses of those who have personally ridden the local waves of victories and defeats are worth more than the hundreds who will advise you without having done it themselves.
6. Watch Your Cash Flow
Focus on monthly cash flow, not equity gains. To become a real estate investor is to become a business owner. And as a business owner, it is your task to create distance between the money flowing into your business every month, and the expenses necessary to keep that business sustainable and growing.
7. Consider Experience, Connection and Community
There's never been a better time for small real estate investors to compete with the big guys because the concept of "location, location, location" is being replaced with "experience, connection and community." With some creativity and love, class-C assets can be converted into ideal properties for millennial-minded companies and hipsters who appreciate buildings with history and character.
8. Study Your Geography
Thoroughly understand the geography of the market(s) you decide to target, down to the street addresses. Every neighborhood has a cusp; although a comparable unit/property may look close on a map, you could be stepping into a completely new territory.