Real estate is an ever-present investment vehicle that you can utilize to grow your finances. As with any market, profiting from real estate is a matter of studying trends so that you know when to buy and sell. Compared to a stock portfolio, however, building and maintaining real estate investments requires a certain amount of legwork and physical labor. There is a lot that goes into becoming a successful real estate investor, but your road to profit can be simplified into four attainable steps, outlined here by Beta Abstract.
1. Build a Network
Before you get in over your head with acquiring the first property that catches your fancy, it would be wise to build a network of professionals that can help you in your endeavors. Keep in mind that the most affordable properties are ones that may require some maintenance and renovation before they can be flipped for a profit. Unless you have the time to manage and repair your properties yourself, you should seek to build relationships with contractors and potential business partners in your area.
2. Find Profitable Properties
Your local real estate agent can help you find available properties on the market, but a savvy investor must know how to separate a lucrative opportunity from the duds. The location of a property is perhaps the most important factor.
A desirable piece of land is more likely to appreciate in value over time, allowing you to sell for a profit in the future. Alternatively, you can start a rental or vacation home business on your new property that will yield a tidy profit if the location is popular.
3. Exercise Good Property Management
Money Inc explains that, after closing the deal on a home, it can take at least 2-3 months to flip the house after repairs and marketing. If you find yourself sitting on a property for months or years, you need to manage your investment well until it comes time to sell.
It is important to maintain a clean appearance and address any utility issues that arise. Constant supervision is particularly necessary if you have tenants living on your property. The Balance notes that delegating such tasks to a property manager is a great way to save yourself a lot of time and make it possible for you to manage multiple properties concurrently.
You should also consider expenses that will come up when home systems or appliances are on the fritz. One option is purchasing a home warranty that will cover such things. When determining whether a home warranty is worth it, take into account how much repairs would otherwise be without coverage. If the HVAC broke down, for example, you would be out up to $5,000 (or more for larger systems). With a home warranty, you can rest assured that your tenants will have items fixed as quickly as possible. Be sure to check with providers to see what all is covered and get quotes for your particular needs.
4. Maintain Legal Protection
If an accident occurs on a property you own or rent out, affected individuals may seek legal action against you. If you are held responsible for injuries or damages, you might be forced to forfeit your home or other personal assets if you can not pay out of pocket.
You can protect yourself from litigation by establishing a professional corporation for your investment property business. Your corporation will be considered a separate entity that may assume liability for certain incidents. You can seek a lawyer to help you form a professional corporation, or you can opt for a less expensive formation service.
Investing in real estate has the potential to reward you generously for the amount of hard work you put in. However, there is always risk in any investment venture. Following best practices and using the resources around you to the fullest will help mitigate your chances of being burned by a bad transaction.
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