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Common Sense Real Estate: The Five Keys To Profitable Property Investing

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Investing in real estate can be a beneficial way to increase your net worth and your income. However, many people have gone into the field of property investment with great enthusiasm, only to be disappointed by the small returns. Investing in property requires careful evaluation of the benefits and risks, not only initially, but also at various points along the way. Experts recommend that investors follow these five tips to ensure success in investing in this area of the economy:

1 - Property Purchases Must Be Strategic

Your choice of investment property is the single most important factor in the ability to achieve a satisfactory return. Older properties often require ongoing maintenance that can cut into income. Many experts advise choosing new properties that often have a maintenance contract to offset any repair costs. New properties will also allow you to take advantage of the greatest depreciation amount. Another important factor to consider when choosing a property is the location. Properties in remote areas often have lower rents and higher turnover rates, which will affect the rate of cash flow. Properties in areas near shopping and transportation are more desirable and can demand higher rents. Investors should also look at the number of rental properties that are concentrated in the area. An oversupply of units will mean lower rents and less increase in value over time. You can view a number of potentially rewarding properties at sites online, such as www.blundells.com.

2 - You Must Be Ready To Manage Risks

When investing in property, there may be a number of risks you cannot control, such as sudden downturns in the economy that cause devaluations in property. However, some risks are in your power to control. Carefully review the prices of investment properties over a period of years to determine that you are purchasing at a better price. If possible, you should buy at low points in the real estate market to assure increases in property value. The best way to borrow money for purchasing investment properties is another important consideration. Investors should not borrow more than the property can reasonably cover over a period of several years. Any equity you build should be carefully guarded to ensure continued gains. Managing risk also includes determining the right ownership structure to protect your asset and receive the greatest tax benefits. Educate yourself on the tax code regarding investment properties so that you can always be aware of changes that may affect you.

3 - Invest Against the Economic Cycle

As with stocks, investment properties offer better returns when you buy low and sell high. Look for areas that are currently seeing negative growth, but offer good prospects for the future. These areas may be in urban centers that are seeing a turnover in population.

4 - Gather A Team To Maximize Your Investment

Many people with the skills and the time to do it will take on the tasks of building maintenance in order to save money and increase their gains. However, it is often more advantageous to find professionals who can take over these tasks and who can do it more inexpensively and more efficiently. Assemble a team who can manage the day-to-day operations of your property so that you can concentrate on finding ways to maximize your investment gains and look for other properties to purchase. A property management company can be critical in vetting tenants to avoid many problems. They can also deal with rent receipts and arranging repairs when needed. A good accountant can help you navigate the complex tax issues surrounding property investment. Get to know an attorney who works in the field of property issues so that you have access to legal information when the need arises. These professionals can help you to increase income from the property and make your investment experience easier.

5 - Review Your Investment Portfolio Regularly

Even if you do your research and plan expenses carefully, not every investment will be a winner. Experts recommend reviewing your portfolio regular to determine which properties are making gains and which are not. Many people wait too long to make changes in their portfolio, and it ends up costing them money. You must be willing to make the hard and timely decision to sell off an investment if it is not making money for you. You can then renew your efforts to find a better property that offers greater returns on investment.

Real estate investing requires a significant amount of research and planning. The rewards can be lucrative, if you carefully follow these five essential tips.

Erin Sanderson has managed to build a property portfolio over the years but not without a few setbacks and mistakes along the way, which is why he likes to share his insights with an online audience so that they might benefit from what he thinks are sound strategies for property investing. He writes frequently for a number of property-related websites.

Posted on November 11, 2015.

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