While real estate can be an immensely profitable field of investment, it’s important to understand that success is never a guarantee. As is the case with other investments, certain pieces of real estate stand to make you considerable sums of money, while others stand to bleed your finances dry. That being the case, every first-time investor should take measures to increase their odds of success. So, if you’re looking to ensure that your first real estate investment is a purchase you won’t regret, put the following pointers to good use.
Be Able to Distinguish Profitable Locations from Unprofitable Ones:
It’s impossible to overstate how vitally important location is to real investors. In fact, it’s no stretch of the imagination to say that the location of your first property has the power to make or break the investment. As such, if your current locale lacks robust demand for housing or healthy property values, expanding your scope to other townships, cities and states may be a worthwhile course of action.
When determining how profitable an area is likely to prove, there are a number of key factors you’ll need to take into account: population size, rate of growth, local economy, median income, home values and rental rates.
Unsurprisingly, areas with large populations and strong economies tend to have a lot of demand for housing, making them attractive to real estate investors.
On the flipside, areas with declining populations and weak economies generally have far less demand, meaning that investment properties in such areas may have trouble generating the desired returns.
Anyone looking for additional tips on differentiating profitable areas from unprofitable ones would do well to work with a knowledgeable real estate investment company.
In addition to teaching you the ins and outs of location research, seasoned professionals will be able to educate you on a bevy of other important topics, such as cap rate in real estate.
Insist on an Inspection before Committing to Purchase:
There are a multitude of reasons for which you should insist on a pre-purchase inspection before committing to buy your first investment property. For starters, a thorough inspection from a certified pro may be a prerequisite for having the property insured.
Secondly, a formal inspection is arguably the best way to get an accurate accounting of how many issues – if any – are affecting the property. So, no matter how many times you’ve personally inspected a potential investment property, it’s important to remember that there are a wide variety of problems that are likely to escape the gaze of any non-professional.
A professional inspection can also help you decide on a fair offer for a property. Depending on how many issues an inspector uncovers and how much money addressing those issues will require, you may want to amend any offers you were thinking about putting forth.
Additionally, if the results of an inspection reveal that a property is home to an exorbitant number of pressing issues, you may reach the conclusion that said property is simply too much trouble.
So, no matter how much a seller attempts to dissuade you from an inspection or how forthright they appear to be, make it clear that this is one condition on which you will not budge.
Work Exclusively with Contractors Who Are Licensed and Insured:
Should your first investment property require major repairs and/or renovations, make a point of working exclusively with contractors who are licensed and insured. You may think that hiring unlicensed contractors is a cost-effective move, but in actuality, this may prove much costlier than working with their licensed counterparts.
Unlicensed contractors have far less incentive to maintain a certain degree of professionalism, stick to budgets or see jobs through to completion than licensed contractors. So, if you give your business to an individual who lacks proper licensing and insurance, don’t be surprised if you ultimately need to call in a licensed contractor to fix any errors they make.
Although real estate is an area of investment that’s associated with big rewards, many real estate investments come with considerable risks. As is the case with other types of investments, one should never assume that success is a guarantee when purchasing investment properties.
However, by taking the time to educate yourself on the ins and outs of real estate, you can dramatically reduce your odds of failure.
