“Never invest in a business that you don’t understand” – Warren Buffett
This statement holds true for all types of investments, including real estate. A smart real estate investor is someone who knows the market well and ensures that he invests wisely and earn greater returns. Unlike investing in shares or mutual funds, where most investors are aware of the way these investments work, real estate investments are fairly unknown to many. Also, it isn’t about buying and selling a property, there is a lot more to it! If you are wondering how to become a real estate investor, this article we share some real estate investment tips to help you get started.
Investing in real estate can be complicated and highly demanding of your time and attention. Simply finding properties at good rates and buying them, might place you in difficult situations more often than not. Hence, you will need a logical plan.
Create some long and short-term goals before you invest in real estate. Then, approach your real estate buying and selling activities as you would do for a business. This will help you see the bigger picture and maintain focus on your goals rather than being deterred by small problems. Planning your investment also requires you to gather information about the market, which is essential to the success of any investment.
Going back to Warren Buffet’s quote, “never invest in something that you don’t understand”, is a fact, because, by doing so you are could make wrong decisions and face financial losses. Learn about real estate investment and the markets that you are interested in. What are the current housing loan rates? What is the rent in the area that you are looking to invest in? What types of buyer or sellers or renters are predominant in that area? Such information can help you understand and assess the current market scenario and plan for the future.
Once you have learned enough, you will be able to notice a trend and create potential opportunities for yourself by using these stats to your advantage and can then plan your investments accordingly.
What aspect of the real estate market are you interested in? Residential or Commercial property? If residential, then are you looking at apartments or houses? If apartments, then are you focusing on penthouses or duplexes? Assessing your preferences in such a manner will help you make more conscious decisions, which again, you could use to develop an area of specialization. Focus on it and gain complete knowledge about it. Build a deep level of understanding and analyse all possible trends in the area as well. This is essential for your long-term success. Avoid the urge of being the ‘Jack of all Trades’ in real estate investment. Focus on one and try to master it as much as you can. Once you have succeeded in this area, then you might want to broaden your horizons by looking at other areas of real estate.
KNOW THE LAWS
This is true for any business. However, real-estate investment demands a greater awareness of laws and regulations that govern the sector. Ignorance isn’t bliss when it comes to the legal obligations that come with any action. Buying a property is a huge financial decision and it is imperative to be aware of the legalities surrounding it before signing the dotted line.
ASSESS POSSIBLE RISKS
As a rule of the thumb, all investments carry some or the other risk. The degree of risk may vary but one mustn’t rule out any risks. You must assess the possible risks with your real estate investment before investing itself. These may include the risks in real estate deals, those in legal implications, and so on.
MANAGE YOUR ACCOUNTS
Whether you deploy the services of a professional accountant or do it yourself, you must ensure that your book of accounts works in tandem with your business plans. Taxes and other latent costs can be managed effectively if your accounts are handled well.
A real estate investment involves a huge amount of money. Hence, it is imperative to be sure about the property you want to invest in. Thorough research and analysis of the market can help you learn, it is also advisable to seek professional guidance from an industry expert before investing. This can also ensure that you steer clear of uncertain emotions and think carefully while making investment decisions.
Sharing knowledge and intellect is the best way to learn. Listening to others’ experiences can help you determine the best way forward for you. This is where a good network can make a difference. You must make efforts to become a part of a group of like-minded investors who work together for mutual benefit. Exchanging ideas, sharing purchase opportunities and updating and/or helping each other on the recent market/legal developments can be made easier with such groups.
In a nutshell…
These real estate investment tips can help you get your head in the right space for becoming a smart real estate investor. Remember, investing in real estate can generate wealth but needs a lot of focus, planning, and perseverance to execute the plans.
Regardless of a long-term or a short-term investment plan, you must prepare yourself for the real estate market before you start investing. There is no substitute for knowledge and once you are up to the curve, you can plan your investments optimally.