Tips to Succeed as a Real Estate Investor

Over the last five decades, real estate investing has emerged as the topmost wealth builder around the world. As a result, more and more promising young men and women are now seriously interested in building a career as a real estate investor. The objective of this article is to help these future professionals prepare for real estate investment.

Mentioned below are some of the most useful tips to help you make your mark as a real estate investor.

Goal Setting: Just like any other form of investment, clarification of your investment goals as an individual is extremely important. Ask the below-mentioned questions to yourself and set goals that are realistic.

1. The age at which you plan to retire.
2. The amount of money you will need to cover all expenses at the time of retirement.
3. Your retirement income sources as of now.
4. The amount you are looking to invest in real estate.
5. Whether you want to acquire properties for the current cash flow of future growth.
6. Your credit rating.
7. Whether you have needs such as long-term care for parents, child education, travel, etc.
8. Whether a tax break is important for you.

Once you have answered these questions, set timeframes for all your goals.

Current Financial Status: The next important stage is to evaluate your current financial status. Though you are emotionally and mentally ready, your finances may not support your aspirations. Once again, try to answer these questions to understand where you stand.

1. The amount of left-over money you have at the end of each month.
2. Whether you are paying any taxes and if part of it can be reduced via correct investment in real estate.
3. Whether you know a reliable CPA.

Plan your next steps on the basis of your net worth, monthly cash flow, and tax liabilities.

Purchasing Power: Now, it is time for you to assess your purchasing power. There are two aspects of this evaluation process.

1. In the language of real state, the term ‘leverage’ refers to the ability of an investor to leverage a property where the property’s loan is paid off by the tenants. If you can do this, the ROI will be higher simply because a smaller downpayment will be sufficient for you.
2. Your purchasing power will also be determined by your ability to qualify for additional financing.

Financing Strategy: The next step involves the determination of your financing strategy. Once again, chalk out the strategy by asking the following questions.

1. What type of funds you want to use for a downpayment
2. Considering your present and projected financial condition for the future, find out what kind of loan would be best suited.

This step will help you understand which type of properties you will be qualified to purchase.

Purchasing Strategy: By defining your goals and objectives clearly, it will be possible for you to find the best opportunities at the right times, and in the right market. For example, you may put your entire investment capital into purchasing just one property in cash or purchase three or four similar properties making 20% downpayment for each of them.

Type of Property: This is the stage where you will have to zero down on different options such as single-family homes, new/resale properties, multi-family homes, commercial properties, condos, etc.

Buying the Property: Finally, you have worked your way to purchase the property of your choice. This step, however, involves a number of risk mitigation tasks.

1. Detailed home inspections to find out probable red-flags.
2. Property appraisal.
3. Get yourself a sound landlord insurance policy.
4. Ensure added protection by placing your property under an LLC.
5. Before closing escrow, verify rents with the property manager.

If you have any other questions related to real estate investment, you can get those details at NRIA or any other experienced investment company.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.