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Thinking Of Investing In Real Estate – A Few Chosen Tips
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Recently I was looking up a few names that have made it to the top of the wealthy people charts and I couldn’t help noticing that most of them made their wealth from real estate investments. Real estate is at the core of any business we come across and if you are interested in becoming a real estate investor, then this could be the best decision of your life. A right attitude and mindset will help you succeed along with a few tips that I have collected in my 10 year association with the real estate world. I have had a period of trials and errors but have realized that if you focus on residential properties then you cannot lose.
Tip 1: Begin small: Don’t expect to shoot up the curve on Day 1 as this happens only in miracles. The reason to begin small is that you are still quite new and inexperienced. You need to keep your risk factors low for fear of losing it all. First, you need to learn the basics of real estate investment and spend only the minimum amount of money. If you invest less time and more money, the end result may not be very pleasant. The ABCs have to come first and then the sentences. Attend training sessions, read books, browse online and talk to people in the real estate business to develop yourself.
Tip 2: Speculation does not work: You need to go for value while making your investment. How do you do it? You need to locate properties where cash flow is more along with potential gains. Value investment is the basis for making wealth from real estate. What is the difference between a value investor and a speculator? The difference is simple. A speculator is hopeful that the property price will increase in the future based on grounds which may be quite flimsy. It is like playing casino in Las Vegas. Whereas a value investor looks at the overall value and then invests in any property.
Tip 3: Don’t wander away from home: You are a beginner and need to concentrate on properties closer to home. The reason is you know the area well and it is a safer bet than starting in an unknown city. You know the trend in your city and the areas that are growing or declining along with the properties that are good. Also you know about upcoming properties and when to make a good investment. You need to stay close enough and observe the trends.
Tip 4: Mistakes will happen: Everybody I know has made mistakes as a real estate investor. Don’t treat your mistakes as failures as they are the perfect way for you to gather experience. Failing is a part of the learning curve and will help you to learn fast. Once you stumble and fall, you will rarely make the same mistake again.
Tip 5: Keep your aim realistic: All of us want to get rich quickly but making blunders will actually do the reverse. You need to be sure about the cost to you for the cash flow you desire. Calculate in terms of ROI. If you want an ROI of 20%, then what should it cost you and so on. You also need to keep in mind the losses you may make if the deal goes wrong and whether you can afford it. You need to think in terms of ‘Is no rent for sometime if the tenant moves out affordable?’ or affordability of maintenance of the property and things to that effect. If real estate investment adds to your financial burden, then it is a sad situation.
Tip 6: The uglier the better: This is better done when you are not a green hand. The idea is to look for properties with problems and by fixing the problem, increase its value instantly. Suppose the property has a damp problem or has termites because of which you get it at a cheaper than market rate. Turn it around by taking care of the problems and sell it at a premium or increase the rentals.
Tip 7: Calculate beforehand: Just buying a property because you can afford it is not enough. If you are thinking in terms of investment, you need to do a few basic calculations. The main things would be – the price you need to pay for the property, monthly installments as well as down payment, loan you need, interest to the bank, rental income, cost of maintenance and other factors. When you add them up you should be making money and not being drained out of existing resources.
Investing in real estate is a safe bet provided you know the basics. Study the market and plunge in to make the best of your investment. Remember, nothing works like real estate business.
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