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Real Estate Investing . . . Is It For You?

March 10, 2017

Tips for novices: The single most important first step for aspiring real estate investors is to determine one’s exit strategy. Two basic exit strategies are 1) to buy and hold rental properties as a landlord; or 2) to become a flipper and hopefully make a substantial profit upon the sale of the property.  Remember, slow and steady tends to win the real estate investment race when you are just starting out. Like any investment, real estate investing requires an action plan.

If you have been successful in the market once and you want to try to scale your success, it is important to look at the funds, the time, your credit, and your long-term goals so you know whether your vision is realistic. It’s also important to determine which type of real estate investing you want to get into and why. Choose a specific target market and study it intensely. Then set a goal, create a business plan and establish systems to achieve the desired goal. Lastly, take small, common sense steps daily toward achieving your goal, such as talking with sellers, owners, and local real estate professionals.

Again, slow and steady tends to win the real estate investment race when you are just starting out.

Tips for seasoned investors: For veteran investors, it’s critical to have plenty of money put aside to act as a buffer. Once an investor has scaled out to a larger portfolio of properties, it is important to have enough cash on hand to rehabilitate 10 to 15 percent of those properties every year. In addition, being prepared is also good advice. Plan for the best, but prepare for the worst. Life and property insurance can provide much-needed financial protection for both property owners and their real estate assets, respectively. From a flipper’s perspective, seasoned professionals need to stay focused on location and price. The best advice is not to overpay for what you’re buying, because you’ll get squeezed on the back end by buyers. Plus, if you overpay and invest significantly in the properties you buy, you’re not going to make a profit. New and seasoned real estate investors benefit from a strategic approach.

No matter whether you are a new real estate investor or have been in the market for a while, it is important to work within your financial limits and to make sure that any deals you negotiate are part of a strategic business plan in addition to being financially and legally sound. You’ll also want to be sure that you understand the tax implications of property purchases and sales and have your exit strategy at the ready should you need to implement it.

Source: U.S. News & World Report Money via Advantage Magazine Jan-Feb 2016 issue. 

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