Ways NOT to Lose Money on Real Estate Deals
While investing in real estate is a great way to increase your income and to achieve financial independence, it also involves taking risks. Unfortunately, there is no way to completely eliminate the risks that are associated with real estate investment, but there are a few steps that you can take to help minimize the risk and reduce your chances of losing money on your real estate deals.
Choose Long-Term Loans
Short-term loans may help you to pay off your investment more quickly, but it will also increase your monthly mortgage loan payment. Rather than pay a larger amount each month, it is better to spread out your payments over a longer period of time so you can maintain a freer cash flow. This will allow you to complete repair and maintenance needs while also freeing up the cash you need to make additional investments. Before making additional investments, however, be sure you have your current properties well under control and bringing in a regular monthly income.
Do Your Research
Before you start investing in real estate, be sure to talk to professionals with experience in the industry. This may mean investing some time and money in attorneys, accountants, and brokers who can provide you with advice and guidance. The money will be well-spent as you learn how to make wise investment decisions.
In addition to doing your research into the act of real estate investing, you also need to actively research the properties you are considering buying. This means conducting a thorough inspection of the home, researching the local market and learning about any zoning regulations, building codes or other restrictions that may affect your investment.
Pick the Right Market
Purchasing an investment property in the wrong market is a surefire way to lose money. Even those markets that are generally considered to be “hot” can have downswings when it is not the best time to make a purchase. To determine whether or not you are looking at a home in a solid market, examine real estate trends for that area while also exploring new developments that are in the works. Talk to real estate experts in the area and learn more about the typical rent costs in the area where you are considering making a purchase. Clearly, a market with a high demand for rental units will make a solid investment, but not if that high demand is only temporary due to seasonal changes or other factors that can affect demand.
Many people who get involved in real estate investment think that the best route is to buy a “fixer-upper” at bargain prices. While this can sometimes be a wise investment decision, it is important to remember that there are many times when this is not the case. Remember, just because the cost of purchasing the home is cheap, that does not necessarily translate to a small investment. The cost of repairs and renovations may soon make the property a much heftier investment than you had initially anticipated.