You can’t really overemphasize the importance of real estate in wealth-building. Small wonder the great industrialist-billionaire Andrew Carnegie, America’s undisputed king of steel, once remarked 9% of millionaires got wealthy via real estate. And there’s a lot of truth in that. Indeed, real estate is largely a good investment option. No doubt, it can generate passive income like no other.
Nonetheless it’s never a walk in the park. For one, you should ensure you are prepared to start a real estate investment. While there are many who have succeeded in the property business, a good number have failed. Worse, more often than not, real estate first-timers fail in their first years in the business.
Fortunately, there are tried-and-tested ways you can succeed. Doing your due diligence and taking a listen from people who have made it should bid you well. Here are some of their nuggets of wisdom.
Pay With Cash
A lot of financial consultants would advise against taking a loan or borrowing money to buy investments. Indeed, you ought to put this into consideration before you go ahead to purchase any piece of investment.
But in the case that you don’t have enough cash to pay for the home, you should at least be able to pay for the mortgage — even without income from rental. Yup, you got that right. That’s thinking straight.
With lessees, there is room for a great turnover. There would also be times when you would have just a few to no renters for your property. And if the mortgage payment is not something you can afford without getting any income from the rental, you may end up in a financial crisis.
What should have been a means of earning and building wealth might just end up becoming a financial burden to you. Also, not being able to make the mortgage payment could affect your credit and cost you money at the end of the day.
Plan out All of Your Expenses
Think ahead. You should give thought to the cost of utilities, taxes, repairs, do things via a company that deals with rentals. Allow them to take care of things like rent collection and repairs.
Although this might be a costly option, it would lessen the burden that comes with being an owner of a rental property. Making use of an agency is also best if you are a busy person who does not have time to ensure that things are being taken care of at your property.
One very crucial thing that you need to do is to price the property right. This is to make sure that the fees and every other expense are covered. Also, you need to take the surplus money from the first few months, put it aside and use it to take care of the repairs on your rental property.
Having insurance on your property is also essential. You also have to be prepared to handle any additional costs as well as other unforeseen situations that may arise.
Research the Property Carefully
When purchasing land that you are going to eventually sell, you need to do thorough research on the land deed. Ascertain if there are any plans for new roads to be built close to the land and think through how that it’s going to affect the value of the property. Also, be sure that there is no lien on the property.
With due diligence, you should be able to find a suitable land property for sale a lot faster than most. That’s assuming you did your homework and check all the right places. But to settle for one, there are things you need to put into consideration. You have to scrutinize the neighborhood, find out if the area is promising, and check out other factors that may affect the value of the property.
Once you are done with your research, you can go ahead to make a decision about buying the property as an investment. But always keep in mind that Investment is always risky. The good news is due diligence lowers such adverse risk.
Some investors start by purchasing a duplex or big house, then staying in one apartment/unit and leasing the other out. This is a good way to start, but don’t forget that you will be staying with your tenant in the same building.
Also, when setting up the budget ensure you can take care of the mortgage and still live without any additional payments. With time, you will get more comfortable managing your investment property and being a landlord.
As this happens, you can consider purchasing a bigger property that has better income potential. It’s bound to multiply in cascades. That’s if you do things right, right from the get-go.