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10 Real Estate Investment Tips For 2016
As 2016 comes to end, it’s that time again to look ahead to the new year. When it comes to real estate investments, making good decisions can make the difference between profit and losing money. Currently, interest rates are still low, so are housing prices in many markets. And let’s face it, people will always need a place to live. These opportunities make the upcoming year a good time to become a landlord.
What are our top 10 real estate investment tips for 2016?
1. Set a Learning Goal
Give yourself a specific learning goal for the new year. Read a new real estate book each month, or take a real estate investing course, or join a real estate investing association. Knowledge is power, so learn all you can about your investments.
2. Research, Research, Research
Finding good deals takes time, especially if you are not yet an expert on the specific neighborhood in question. Browse the MLS, walk the neighborhoods that interest you and ask local experts questions to learn about potentially profitable real estate markets in your area. You can also work with a realtor that specializes in income properties. Spending time on research can keep you informed and ready for lucrative investment opportunities.
3. Don’t Be Afraid To Negotiate
Negotiating is a skill that doesn’t come naturally to everyone. Don’t be afraid to negotiate aggressively with sellers in order to get the best deal possible. Look for opportunities to give the sellers something they want while also scoring a better deal for yourself. And most importantly, don’t be afraid to walk away if the negotiations are not going well; there will always be another property.
4. Focus on Positive Cash Flow
Appreciation is great, but you can’t rely on it. Remember the housing crash of 2007-2009? Millions of homeowners and landlords are still underwater on their mortgages. To avoid losing your savings in a housing downturn, focus on buying properties that will provide strong monthly cash flow… without relying on rents or values to rise. Don’t try to force positive cash flow with a large down payment, either – the deal needs to make sense without mathematical contortions. If the property doesn’t cash flow, your money would be better invested somewhere else.
5. Be Selective
Buy quality over quantity, especially when you’re starting out. A dilapidated property in the tough part of town might be cheaper upfront, but it comes with higher risk, higher maintenance expenses and difficult – and sometimes dangerous – tenants. Initial purchase price is just one of many factors to consider.
6. Set Rules – and Follow Them
What’s your budget? How much money are you comfortable borrowing? What is the minimum cash flow you require? Create your own personal set of real estate investing rules and follow them. Make them specific and measurable. Having an established investing strategy can help you avoid making decisions based on emotions. If a potential property doesn’t meet you pre-established rules, walk away.
7. Start Small
If investing in real estate is new to you, start small. Primary residences with an income suite, Duplexes and triplexes are all great beginner real estate investments. Don’t get stuck in analysis paralysis, where you search forever without putting a single offer on the table. Start small, but start.
8. If Starting Out, Pick One Type of Real Estate Investment
If you plan to invest in real estate for the first time in 2016, start with one type of investment. Are you interested in flipping houses? Do you want to renovate a property and rent it out? Do you want to buy a turnkey property that’s ready to lease out? If you’re just starting out, pick one area to focus on. Each type of real estate investment requires different skill sets and different specialists to help you. The financing and cash flow calculations are also different. Once you have mastered one area, you can expand into new projects.
9. Get Out Of Your Comfort Zone
If you already own real estate, get out of your comfort zone. Look into new markets or new types of real estate investments. By branching out, you can further build your real estate portfolio and discover new and profitable areas to invest in.
10. Go Where There Is Money to Be Made
Are income properties in your local area affordable? Are they cash flow positive? When it comes to real estate investments, go where you can make money. You may need to look out of town or even to another state or province to find great investments.
Whether you invest in real estate on a small or large scale, having a good action plan can make you a more successful real estate investor. Finding solid investments can help you build your real estate empire and get you on your way to a comfortable retirement.
What are some of your best practices when it comes to real estate investments? Do you have a favorite tip to share?