Investing in Real Estate can be profitable. It can also get real ugly, real fast too. You just have to know what you are doing. Like in everything else, you need to know what to avoid. There are countless stories of investments gone wrong; The stories of the landlord that could not manage his property or the couple that ran their well dry because they rushed into investments.
Thereby, if you wish to enter the wheeling dealing world of real estate investment, you should not be entering it all blind eyed or with blind optimism for that matter. There are a lot of good deals out there at the moment, but there are some bad ones that will cripple your finances. In this article you will find 5 of my key learnings from my exposure to real estate during my time working in the bank and my own personal experience.
First and foremost, this will be your full-time job. I do not mean that it will consume all your time and that you do in life. You just to be aware of all your opportunities and be prepared to grab them. Real estate is knowing about you opportunities and follow through. You never know who your next client will be. You need to build your network and the most basic thing you need is to have your business card on you all the time. No one can sell their property to you if they cannot contact you or buy that lovely little property that you have on hand.
Rentals may give you continuous cash flow, but you may have to consider the various type of complaints that the tenant come to you for. Tenants will come for you for everything under the sun, from blocked toilets to noisy neighbors and they have the right to do so. You may have a management company running things for you, the tenant will always come to see you in the end. After all, you are the person that rented the place out to them and not the management company. There are so many laws that protect the tenant’s rights, just be mindful that you may end up paying more than you are getting.
When hiring a contractor, take one that charges by the job rather than the hour. Unless you plan to oversee the project for the whole duration, it is more likely than not you will be paying more than you bargained for. Ensure that you sign a contract with a must be completed by clause. The very least, you will get some compensation in the form of discount or penalty payments if the contractor does not complete in the stipulated time.
This is common sense, but always make a thorough inspection of the property before purchase. The repairs that need to be done to the property need to be lower than the profit that you intend to make. Foreclosure properties that the bank get, may be very good investments. You may get them for cheap and you are allowed to inspect them beforehand.
Finally, take the advice from someone that does not invest in property with a pinch of sale. They might say that they know where the next big thing is, but they would not know the pitfalls of investing in property until they do. They will sometime make an emotional case for it and you would be sucked into the hype. Before you know it, you will have a piece of property that is depreciating faster than a third world country’s currency.
These are just a few of my learnings and I am still learning. There is still a lot that I have to learn. Hopefully, the 5 learnings that I have will help you along the way to becoming a great investor and to give you food for thought on some the aspects of real estate investment.