Most Millennials aren’t satisfied with their primary jobs alone. The need for a second source of income, whether to match the growing lifestyle or costs, is increasing among them. While a few Millennials find their second income source through entrepreneurship, a good choice for you may also be real estate investing.
However, real estate investing isn’t something that you can just think about and start off with. It requires genuine planning and execution. In this article, we’ll discuss 10 tips that you need to get started with the real estate market.
1. Choosing the Right Location
Whether you’re looking for tenants or trying to sell it, not having a great location often diminishes the value of the property. A great location often depends on the development rate, crime rates, and accessibility to facilities such as
- Medical care
- Public transport
- Shopping malls
- And many other things.
It’s usually advised to avoid locations with dependencies like tourism or a specific industry. If the industry fails or tourism fades out, you’ll only be left with a property that isn’t in the right location. When Detroit’s auto industry failed, home values were in drastic decline.
2. Consider Short Term Rental Investments
Short term rentals are in huge demand. Given their accessibility and cheaper price point, many tourists and business persons are considering them over hotels and other costlier alternatives. As an investor, this is a great opportunity for you. You can either buy properties in your name or consider co-owning with other individuals at a much cheaper cost. That way, you get to own a share of the real estate and enjoy profits without going through the hassle of developing or maintaining the property.
Whichever short term rental investment companies you choose to invest with, make sure that they’re capable of generating higher ROI, have updated technologies, and have repetitive investment opportunities like Techvestor.
3. Invest in Developing Properties
Developed locations are great for investment. But properties in developing areas are much more fruitful for investors. They don’t attract higher prices than the developed locations but are expected to see a hike in prices soon. Developing properties, more than developing areas, should be chosen as the parameter for investment. Developing properties often cost less due to a lack of demand, but increase in cost whenever it’s close to finishing and investors start pouring in.
4. Don’t Buy High
Don’t fall prey to FOMO and start buying properties that are already in a higher range in expectation of them growing in more demand and price. More often than not, this strategy fails. Once a property has been stabilized, it sees little to no improvement in pricing unless there are new projects developing around it. Consider owning properties that haven’t matured.
However, don’t miss out on real estate that is showing great potential. Even if the price is a bit higher, these properties can generate greater ROI against your investment. Keep an eye out for the latest infrastructures developing around a location and take your steps carefully.
5. Seek Distressed Sellers
It may seem opportunistic, but as an investor, you must take these steps to stay ahead. Distressed sellers like divorced couples and individuals in financial aid often sell their property at a much lower price than the market. While it’s not a guaranteed opportunity, it can let you have a high-value property without investing the original price for it. However, you may have to pay them in cash for the property. Before going into the ad market to find such individuals, consider having enough capital to bend them to your terms.
6. Calculate Hidden Costs
When buying a used property, consider calculating hidden costs before committing your capital to the cause. Used properties, especially with tenants, often have infrastructural issues like electricity supply, water supply, and other problems associated with them. Make sure that the properties are lawful, don’t have any significant damages, and have a great reputation among tenants and buyers. Even if the ownership changes, tenants often find it repulsive to rent inferior properties.
7. Understand the Market Demands
Investment in real estate only starts with the money. Going forward, you need to modify your property according to the market demands. You may need to dig the lawn away for a swimming pool or replace the floors with a wooden finish. But that shouldn’t be done according to your preferences. If the buyers prefer a lawn, don’t replace it with a pool. It’ll only reduce the value of your property in that particular region. Before jumping into doing renovations, consider researching the buyer’s market and other properties to get a good overview of what can be done without destroying the value.
8. Find Your Niche
Don’t be a jack of all trades in the real estate market. Once you start growing your portfolio, choose a specific niche that you have the most expertise in and consider sticking to it. For example, if you have a significant number of office spaces in your portfolio, startups will consider renting from you more than your competitors who have more diverse investments. Funneling down your investments presents you as a market expert and authority who knows what is expected of their properties.
9. Comply With the Regulations
Real estate is complicated in regard to regulations. The number of floors you can have, the height of the building, water recycling, environmental impacts, tax burdens, and every other attribute of rules and regulations needs to be complied with before starting to take tenants or selling the property. Complying with the regulations may also increase your credibility in the buyer market.
10. Don’t Over-Commit
Real estate investment is a business. And as with any business, don’t over-commit to any one property. If it’s going out of your budget, make your move elsewhere. If you like a property but the data doesn’t support your intentions, move away. Don’t follow your instincts too much until you have years of experience in the market.
The Bottom Line
Hopefully, these 10 tips will help you get started in the real estate market as a successful investor. Location is the main determining parameter, followed by short term rental investments and developing properties. Consider buying low and seek cheaper options in the market. Moreover, renovate your properties according to the demand and not as per your preference.