Investing in Real Estate can come in many forms. Are you going to live in your investment? Do you want to flip? Or would you prefer a single- or multi-family rental and hold on for appreciation? The possibilities are endless and so are the possible outcomes. If you’re thinking, “the flippers on television make a ton of money and it looks like so much fun,” remember that it is just television, thankfully, and it IS a lot of fun!! It can also be a lot of work, it takes a tremendous amount of time and it takes the right vendors e.g. permit-pusher, handy-man, etc. While some people do very well with flipping or investing, there are plenty that do not. Before diving headfirst into the market, you’ll need to do your homework first. Consider your long-term goals and create your plan according to those goals. Make sure you know what you are getting into as far as the home condition is concerned as a good portion of your profit is dependent upon the price you pay on the front-end. Each rental property needs a thorough financial analysis and since the good properties go quickly, you need to be able to analyze quickly. Depending on your strategy, you should know, at the very least:
- Net income (income/expenses)
- Cash flow (net income/debt financing payments)
- Return on investment (cash flow/investment)
Will you manage the property yourself? Can you cover the expenses if there are unexpected vacancies or repairs? How will you find your tenants or buyers? Investing can be rewarding financially and, as with all things, in order to be successful you’ll need to make sure that you understand the financial commitment. It sounds a bit daunting, but in reality, it’s the same system you’ll use every time and it becomes second nature.
I recently found a wonderful property for an investor client of mine (a high-quality remodeler I might add!). I immediately alerted her because time is of the essence in our market. With some analysis, along with knowing what we were up against as far as competition was concerned (it was an investor puppy-pile-up outside this home!!!). We decided on an offer price and quickly submitted the offer to the listing agent. Within a day, that property had 36 offers. I got a call from the listing agent letting me know that her client had chosen our offer…not because it was the highest price, but because the way the offer had been structured; it was clean…it was super clean. Real Estate investing is a hands-on occupation and relying on a seasoned professional to supply the information you need to identify and win the properties that best suits your goals is one of the most critical components of investing in real estate. If you aren’t moving forward with each investment you make, you might be moving backward.