In today’s market, investing in real estate is not for the faint of heart. You must be able to tolerate a significant amount of risk, because property values are, at best, unpredictable. You may think you’ve bought at the bottom of the cycle, only to discover a few weeks after your purchase that the value of the property has declined again. You may decide to “fix and flip” the property, but later learn that buyers in that part of town are especially scarce. Or, you may have trouble finding a reliable renter.
There are dozens of potential problems connected to real estate investment today, but you can still make plenty of money if you know the secrets. Apparently lots of people are willing to at least stick a toe into the real estate investment pool, whether or not they’re armed with the right information. In August 2011, according to the National Association of Realtors, investors accounted for 22 percent of all homebuyers.
Here are the first five of my top 10 recommendations for successful real estate investing (the second five will be presented next week):
1. Know the total amount of money you have to work with for investment. You shouldn’t estimate, merely contemplate or delegate this vital part of the process. You need to know exactly what you have available in which kinds of resources. How much cash do you have on hand that you’re willing to commit to your investment? How much in mortgages can you qualify for? How much money do you have in other investments that you would be willing to sell? Don’t guess what your resources are and don’t get sucked in to committing to a higher purchase price than you can actually afford.
2. Understand your risk tolerance. If you’re looking primarily for safety, real estate investing probably isn’t for you. If, on the other hand, you’re looking into solid possibilities for profit-making, and you’re willing to do your research, opportunities abound in real estate. Find an online tool to help you discover your risk tolerance. Here’s one to try: http://njaes.rutgers.edu/money/riskquiz/.
3. In this market, evaluate your success through monthly returns on your investment, not by how much it appreciates in a certain time period. We’re no longer in the boom times of 2005. You may not realize a significant jump in value in six months or even a year. In order to realize the most income or appreciation from your asset, you must keep a close eye on how you’re spending your money. You can increase your return by decreasing your holding costs and that can be accomplished by constantly monitoring and tracking your expenses.
4. Don’t get emotionally attached to a property. Investing is a business proposition. Make decisions about the disposition of a property based on sound financial analysis, not on what your gut tells you or how much the asset appeals to you personally.
5. Keep track of every penny spent on the property and earned on the property. A spreadsheet is the old-fashioned way to do this. A new online subscription application that you can take with you anywhere you take your smart phone or tablet lets you manage your real estate portfolio the way you manage your stock portfolio. After all, if you don’t keep meticulous track of all of your investment expenses and earnings, you can miss out on a great opportunity to sell—or buy— a property. The bottom line is that advance tracking lets you make better decisions about your investments. To learn more, visit www.remhub.com.
2. Understand your risk tolerance. If you’re looking primarily for safety, real estate investing probably isn’t for you. If, on the other hand, you’re looking into solid possibilities for profit-making, and you’re willing to do your research, opportunities abound in real estate. Find an online tool to help you discover your risk tolerance. Here’s one to try: http://njaes.rutgers.edu/money/riskquiz/.
3. In this market, evaluate your success through monthly returns on your investment, not by how much it appreciates in a certain time period. We’re no longer in the boom times of 2005. You may not realize a significant jump in value in six months or even a year. In order to realize the most income or appreciation from your asset, you must keep a close eye on how you’re spending your money. You can increase your return by decreasing your holding costs and that can be accomplished by constantly monitoring and tracking your expenses.
4. Don’t get emotionally attached to a property. Investing is a business proposition. Make decisions about the disposition of a property based on sound financial analysis, not on what your gut tells you or how much the asset appeals to you personally.
5. Keep track of every penny spent on the property and earned on the property. A spreadsheet is the old-fashioned way to do this. A new online subscription application that you can take with you anywhere you take your smart phone or tablet lets you manage your real estate portfolio the way you manage your stock portfolio. After all, if you don’t keep meticulous track of all of your investment expenses and earnings, you can miss out on a great opportunity to sell—or buy— a property. The bottom line is that advance tracking lets you make better decisions about your investments. To learn more, visit www.remhub.com.
Next week: the next five recommendations for successful real estate investing.
http://www.remhub.com/2011/10/03/the-secrets-to-real-estate-investing-%E2%80%93-part-1/
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