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When
it comes to investing, everybody has certain
goals and aspirations. However, we have found
that there are certain guidelines every aspiring
real estate investor needs to know:
1.
Compare Property Values and Rents
Financial statistics only go so far; the best measure of a property's
market value is often the sale prices of nearby properties. The
same holds true for area rents. A low price can often be justified
by a reasonable rent; renters who can afford a high rent can afford
to buy instead, so reasonably priced rent is a need.
2.
Be careful - Tax laws may change
Don't base your tax investment on current tax laws. The tax code
is constantly changing, and a good investment is a good investment
regardless of the tax code. The right property with the right financing
is what you should look for as an investor.
3.
Specialize in something you Know
Start in a market segment you know. Whether you focus on fixer-uppers,
foreclosures, starter homes, low-down payment properties, condominiums,
or small apartment buildings, you'll benefit from experience by
specializing in one aspect of investment real estate properties.
4.
Know the Costs going in!
Know the financial statements inside out. What are operating expenses?
What are loan payments? Vacancy costs? Taxes? What does the cash
flow statement look like? These are key issues that must be addressed
before making a solid investment.
5.
Know where your tenants are coming from
If the last rent increase was recent, your tenants may be considering
a move. If tenants have a short-term lease, they may be living
there simply to attract unsuspecting buyers. It is also important
to collect the tenants' security deposits at closing.
6.
Assess the tax situation
Taxes are an integral part of successful real estate investing,
and they often make the difference between a positive cash flow
and a negative one. Know the tax situation, and see how it can
be manipulated to your advantage. It may be a good idea to consult
a tax advisor.
7.
Investigate insurance coverage
If seller's coverage is based on lower-than-current replacement
value, your insurance cost may increase when you pay a higher purchase
price.
8.
Confirm Utility Costs
Ask the local utilities to verify recent utility expenses, especially
if any of these costs are included in your tenant's rent.
9.
Consult Your Accountant
Taxation is a key element of successful real estate investing,
so be sure to find an accountant who is well-versed with the constantly
evolving tax code.
10.
Inspect!
Make sure that you always perform a thorough inspection of the
property before buying it. Never, ever buy any property without
at least examining the site. In some cases, hiring professional
inspectors to examine the structural mechanical system may be a
sound investment.
The
purpose of this newsletter is to stimulate
thought for our clients and professionals we
network with. One should consult with a qualified
real estate professional prior to implementing
any real estate planning strategies. If
you are a mortgage, insurance financial planning
or tax professional, or legal professional
receiving this newsletter or know of one, please
contact our office to introduce yourself and
your services to us. We are always seeking
to grow our referral network and expose professional
services to our client base. |
