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10 Important Tips to Successful Real Estate Investing

Category: Real Estate News | Permalink

Published: Monday, July 12, 2010

01.) Compare property values and rents: The best way to determine the market value of the property is to find out the selling prices of nearby properties in the community. The same applies to properties for rent. A low cost is regularly justified by a sensible rent; renters who can meet the expense of a higher rent can afford to buy as an alternative, so reasonably priced rent is a must.

02.) Pay attention to tax laws: Don't base your tax investment on current tax laws. The tax codes change frequently, and a good investment is a good investment despite of the tax code. The right property with the right financing is what you must look for.

03.) Focus in something you know: Start in a market your already familiar with. Whether the focus is on fixer-uppers, foreclosures, starter homes, low-down payment properties, condominiums, or small apartment buildings, you'll benefit from the experience by specializing in one aspect of investment real estate properties.

04.) Know the costs before getting started: Know the ins and outs of the financial statements. Ask questions. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These questions are important to tackle prior to making a solid investment.

05.) Know where your tenants are coming from: If the rent has gone up recently, it's possible that your tenants may be considering moving. Some tenants who have short-term leases may be living there simply to attract unsuspecting buyers. It's important to collect the tenants' security deposits at closing.

06.) 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.

07.) Investigate insurance coverage: If a seller's coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price.

08.) 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.

09.) 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.