6 Tips for Getting Into Real Estate Investing | alecsalameh.com
6 Tips for Getting Into Real Estate Investing
Real estate investing can be a lucrative opportunity for those looking to turn a profit with their investment. There are many options to choose from when looking for a Florida investment property so it is important to be sure that you understand all your options and factors that will impact your investment before proceeding with any transactions. Lee County real estate agents can help you navigate the market and learn everything you need to know about real estate investing. Check out these six tips for getting into real estate investing!
Understand What Your Financial Obligations Will Be
Before you commit to any investment, it is a good idea to become familiar with the entire spectrum of financial obligations involved. When purchasing any property, there are costs associated with the purchase and they are not cheap. These costs are generally easy to determine and can be planned in advance before conducting much research.
There are, however, additional costs associated with investment properties that go beyond simply making a purchase. Before you enter into a purchase, be sure to calculate not only the entire purchase cost but also the ongoing costs that you will be responsible for while maintaining and managing the property.
One of the most important things to consider is the real estate investment trusts if you are taking out a loan to finance the purchase. Real estate investment trusts or REITs are companies that provide financing for investment properties. While these companies are a helpful resource for investors that facilitates the investment process, investors are still responsible for the income taxes.
In addition, to purchase costs, you will want to determine what your expected operating expenses will be. This will include expenses such as maintenance, utilities, local taxes and fees, and any other expenses associated with maintaining and renting out the property. Depending on the type of property, the location, and other factors, operating costs can land anywhere between 35% to 80% of your gross income.
Research Property Type and Diversify Your Interests
Once you understand the financial prospects of investing, you will need to determine what to look for in an investment property. There are many different types of investment properties that can offer a variety of different benefits, opportunities, and responsibilities. It is important to become familiar with the types of investment properties that are available to you.
In general, there are two categories of Florida investment properties: residential and commercial. Residential investments can be either single-family or multi-family units that are managed by the landlord (i.e the investor) or a management company and leased to individual tenants for the purpose of a primary residence. Commercial properties are properties that are generally leased to a company for various business purposes such as manufacturing, storing, or selling products and services.
In each category, there are even more subcategories of property types that offer unique opportunities for growth. It is a good idea for new investors to become familiar with all the options in order to make a more informed investment decision. In addition, it can be helpful to begin by diversifying your investment portfolio by investing in a variety of different properties. As your portfolio grows, you will be able to narrow down your prospects to one or two specific property types that provide you with the best results.
Get to Know the Area
Keep in mind that money is only a piece of the puzzle when it comes to investing. The location has a lot to do with the potential return on investment of the property. Factors that can impact the value and potential of your investment property can include things like curb appeal, distance from local necessities or attractions, crime rating, and growth in the neighborhood. Never buy a property without understanding the state of the neighborhood and how that will impact your investment in terms of vacancies, operating costs, and income.
Understand the Risks
Real estate investment comes with a lot of rewards but that doesn’t mean it is completely risk-free. It is important to make sure that you are protecting yourself and your investment financially and legally. It can be helpful to have a network of professionals at your disposal such as real estate professionals and lawyers.
If you are looking into multiple investment opportunities, it can be a good idea to use a Limited Liability Company rather than purchasing and filing taxes under your own name. This allows you to manage the risks more effectively because all responsibility rests on the LLC rather than on you personally. For example, if anything were to happen on that property, you could not be personally charged or fined with any legal or financial consequence. The LLC, however, can be fined and charged with legal compliance cases.
Consider Resale Value
When you are investing in real estate, you will want to remember that not all properties will stay in your portfolio forever. There will be times when the market fluctuates or changes in your own life will cause you to want to sell. Make sure that you are considering the resale value of your property before you even make the purchase.
Build a Contact List
Finally, you will want to have a contact list on hand at all times to deal with any and all potential circumstances surrounding your property. This might include maintenance contacts such as plumbers or contractors, legal advisors, financial advisors, real estate advisors, and any other professionals in your network that you might need to contact. There will be situations where you will have disputes, emergencies, or financial issues that require immediate attention from a professional. A contact list will help you have all your resources available for any situation.
These are just a few of the things you should consider when looking to become a real estate investor. It is a big responsibility that can come with a big reward. Remember to conduct your research and connect with knowledgeable professionals so you can stay protected and get the most out of your investment property.