Investing in Real Estate: How to Profit From Your Own Passion

Many people have already recognized that the present lull within the housing market has provided an excellent opportunity for them to start their own real-estate investment business. Now is a great time to profit from your own passion and set up such a business for yourself.

Have a Plan for Your Real Estate Investment

The vital factor, however, is to ensure you have a plan. Once you have a good plan in place you will find any fears you may have had will disappear and you will be ready to make a commitment that will grant you the financial freedom you have always yearned for.

The first thing you will have to do is to ensure you have the right mindset to begin with. Indeed, many people going into the field with an entirely wrong mindset soon find themselves failing. The key, of course, is to purchase the best rental property available, which will ensure you get the maximum profit on your investment.

Knowing exactly what costs, rental charges and ultimately what kind of profits you can expect is essential. This way you will be taking less of a risk and giving yourself a great grounding on which you can build a successful business. Knowing how to source cheap properties will be vital to success and obtaining some discount properties to start should give you immediate equity, provided you go about things in the right way.

Avoiding the Usual Real Estate Mistakes

The important point is to remember that the properties you choose to invest in are likely to be very different from those you may want to live in. Many novice property investors will simply find an area they would like to live in themselves, choose a few properties they like and then simply walk into an estate agent’s office with an offer. The problem is, of course, that their low offer is likely to be instantly rejected.

Do Your Real Estate Investing Home Work

In simple terms, they have not done their homework. Any UK online estate agent will tell you that you need to know something about the seller and the reason why they are selling. There is really no point in going into any deal ‘blind’. Should the seller have no reason to drop the price, then they won’t. Lesson number one is to target the sellers and not the properties.

Others make the mistake of attending a ‘Buy to Let’ seminar and paying out thousands on a deposit without taking into consideration aspects such as membership or other fees. Further issues such as tax and insurance, maintenance costs, certificate checks and management fees are often not taken into consideration. Novice investors soon find themselves in a situation where the rents they are receiving are not even covering the monthly expenditures.

Locating Investment Properties

Locating the right properties then first and foremost means locating the right sellers. In other words, you are looking for sellers who need to sell their property as fast as possible. This will mean that the chances of them dropping their price – sometimes quite dramatically – will be far greater. These sellers will have both a very strong reason for selling and a pressing deadline that they simply have to meet. Perhaps, they are facing foreclosure or need to move due to a job change.

How Much Equity Does the Seller Have?

In addition, doing some research on the seller to ascertain whether they have some equity in their home will be essential. In others words, it is important that they have a large stake in the property. Should they still owe a high percentage of the property’s value then there will be little chance that they will be able to drop the price, even if they wanted to.

One good way of going about this is to get as many estate agents on your side as possible. This means you will need to show that you are professional, well organized and have a strategy in place. Estate agents are obviously in the business of selling properties as quickly as they can. Showing them that you are a well-organized investor will have them referring ‘motivated’ sellers to you and perhaps even negotiating a discounted price on your behalf.

So have a plan, get on the right side of as many estate agents as possible and start networking with other investors. While they may be competitors on occasion, other investors can also be a great way of finding good investment properties. For example, one investor may have been offered a flat at a good discount price, but prefers not to deal in flats. They may well then refer the property to you.

Finally, you could always get your own “We Buy Houses” fliers printed and start having them distributed in as many areas as possible. You will soon find that the offers will come flooding in.

Editor’s Note:

Doing your homework on investment Real Estate also involves crunching a lot of numbers. You need to know rental values, and then allow for vacancies, maintenance and repairs, taxes, financing costs, insurance and have a cushion for unknown contingencies before you will make a single cent in profit. But if you buy right i.e. don’t rush into buying and keep looking, eventually you will find the right property that will have the right numbers. You need to have your financing in place before you need it, so that when the perfect deal presents itself you are ready to pounce.

Don’t expect to make thousands in profit every month either. A single rental may only cover the mortgage and expenses and give you $100 a month in profit. Some people wonder if it is even worth it. You need quite a few properties to make a living but even one Real Estate investment home makes a great retirement fund. When you are ready to retire the house(s) will be paid off and instead of paying the major portion to the bank the rental will be putting all that money into your pocket every month or you can sell and put the entire value of the house in your pocket instead. Even if the houses aren’t fully paid off rents will probably have risen while your mortgage stayed fixed so over time more money will end up in your pocket every month while the bank gets the same amount every month.

See Also: