7 Things Every Investor Should Know About Real Estate Investing
Investing in real estate is one of the proven ways to create lasting wealth. As in the words of Mark Twain, “buy land, they are not making it anymore.” Real estate investing is becoming a hot topic as Millennials want to learn the ins and outs of this sector. There is no right or wrong way to start your journey, but we believe that you should know these tips before starting out.
Buy and Hold Strategy
If there is one thing that works in the investment world, it will be the compounding effect. Let me show you what I mean. Let’s say, you buy a few stocks in the market, and next year you sell them and buy new stocks. You keep repeating this setup for next 20 years. How much money will you make?
Very little compared to the investor who holds these stocks for long-term ventures. Take the example of savings account and rental properties. The profit lies in the long run investment. You start earning money once the investment has paid for itself and then you start making interest + profit.
I am not saying this to eliminate the value of a short-term investment. As a beginner, you should absolutely invest for short-term, but if you want to achieve true success, you must have a long-term investment strategy.
98% of Success=Preparation
Real estate experts do not know everything. However, they remember every tiny detail about their area. Ask them about recent developments, local council, tax structure, new homes for sale, foreclosure, competitors, schools, agents, and you will immediately get the correct answer. These experts have studied the markets. When they are seeking a deal, they have already made the 98% effort.
This principle is applicable in other walks of life. If you are a stock exchange investor, your success is not dependent upon the actual purchase. In fact, buying a stock does not guarantee success. It is your planning and preparation that makes you successful.
Explore the Tax Structure
Real estate investment is not just about purchasing land. You must study the tax structure of your local market. If the tax rate is too much, consider moving your investment site. You can figure out the tax rate just by calling the local tax assessor. Experts suggest not to invest in an area where a reassessment scheme is about to arrive.
Know the Plan
Every area undergoes significant renovation every few decades. A new development attracts new residents, and the real estate prices start increasing. When this happens, people start investing in the central area where prices are high, and the market is overcrowded. In such cases, your best chance is to invest in the adjacent markets. In these areas, you can find real estate at a low price with high returns.
You Cannot Start Without Education
Real estate investments involve thousands of dollars. Would you like to take a risk worth $250k or will you spend some bucks on your education? Investing without a plan and learning on the go is a recipe for failure. If you want to get started in this industry, you must study the experts. Get an official training, work with an investor, join meetups, explore the local market, and do everything in your power to equip you with the right knowledge to succeed in the market. With right tools, the success does not seem like a surprise; it becomes your right.
Use Structured Loans to Maximize Your Profit
Successful investors do not entirely use their own funds. You will see them using structured mortgages and private money loans for funding their investment ventures. That is the key to advanced success in the real estate world. As an investor, you must learn to leverage funds arriving from other sources.
Stick to an Investment Plan
When you begin, you get countless opportunities to start investing in the real estate. You can start with wholesaling. You can flip homes, and you can use rental properties. Another option similar to the stock market is to invest in a REIT (Real Estate Investment Trust). However, you cannot succeed in all walks of this industry. You must specialize in one department and leave the rest.
In the beginning, it is okay to try various options, but sooner or later you must get settled and start your journey within your chosen niche.
[Photo Credits: Picserver & Pixabay]
