You have most likely seen the multiple infomercials with a wealthy investor that is offering their sure-fire real estate investing system.
They usually go on and on about their rock-solid no money down rags-to-riches real estate investment course with easy
payments that total thousands of dollars (but only if you call right now because quantities are limited) and now you are probably thinking, “wow this looks like a great deal, I better order it quickly before the special offer expires. Notice how there’s always a special offer and/or a limited time offer? Anyway, I am not saying that this person isn’t telling the truth, he or she may have had success using their “Real Estate System”. Regardless of which course or school of thought you buy into there are several key areas that should be similar and an investor needs to be aware of when engaging in any real estate related transaction.
Number 1: Don’t Overpay for the property
The whole point in investing is to find properties that are undervalued. How does one find out what is undervalued versus overvalued? Without getting into too many technical details, the bottom line is you need experience. Yes, much like shopping for anything else, you need to know what similar properties are selling for. It’s advisable to stick with one market, perhaps the one closest to you in proximity as a starting point.
Number 2: Competition
Yes, you are actually going to have competition. Do you think that you are the only one seeing those infomercials!
Number 3 Do renovations that count
You need to reach a point where the beauty and the payoff balance out. This one really should be common sense, though, but properly executing it can be very difficult for some. How can you do this? Well, there are many ways. Make upgrades to the property that people actually care about. Kitchen and baths are always good starts! Though not all upgrades will automatically raise the value of the home. Don’t be a cheapskate and repaint old appliances and/or put dented, used appliances and think people are not going to realize. Granite countertops on worn old cabinets is also a no-no. Remember to think in terms of what the market wants, not what you personally want. This is an investment, not your personal residence. You aren’t the one buying it to live there; you are trying to sell it to someone else for a higher price than you bought it.
Number 4 Know Your Budget
It may be fine going through your life on a whim, but real estate investing is serious business, and thus diligent financial planning and budgeting is critical to your success. You don’t need to be a finance geek, however you need to be disciplined and know your budget from the onset, or you may be finding you are learning that you need to make certain renovations or upgrades, and didn’t anticipate it going over to a certain cost and now you are stuck between properly renovating the property and cheaping out on the rehab. Think ahead as to what is needed before actually going forth with investing in real estate.