Real Estate Investing For Success
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Real Estate Investing Tips Real estate investing Everyone wants to get on the real estate investing to the find the perfect rental property. And although there is money to be made in how to succeed in real estate investing , such as rental properties or even foreclosures , there is more money to lose if you are not careful in your decision making.
About me , my wife and I purchased our first 2 bedroom 1 bath condo home in August 1990 in the Northern Virginia area. During the twenty-one year period that we have owned this property, we have lived in the property only 7 years. The remaining 14 years I have been renting out the rental property as a Landlord. Since purchasing a larger townhouse in 2003, we have been renting our condo rental property ever since that time. Contrary to what the perception is regarding owning rental properties and the misinformation, about fame and fortune status of being a landlord of your rental property, it is not always a bed of roses. Especially when you first purchase your first rental property as we did, with no money down (I used a VA loan), , we didn’t make any money at all renting the property for at least the first 5 years.
Make sure you can afford the rental property When my wife and I first purchased our first home (now a rental property), since I am a US Navy veteran, the realtor said we could qualify up to 250,000 for a VA loan. Mind you this was twenty years ago, and real estate investing laws and rules change almost yearly. Sure we could have purchased a much more expensive home, but my 18,000 yearly salary at that time in 1990, would not allow it, even though the realtor was pushing me into buying a more expensive home. Only you know your finances, your monthly expenses. You need to make sure your crunch the numbers to make sure that you can afford the monthly mortgage note, in addition to your current mortgage and other monthly expenses you are currently paying. Effective money management ensures you don’t go over your head in debt.
Ok, you’ve done the math, and you have determined that financially you can afford the rental property. Great, now who is going to manage the property. There is a lot more that goes into owning rental properties than just collecting the monthly rent check from your tenant. Things to Think About.... What about rental property maintenance? Who will advertise the rental property? Who will handle Legal and Tenant Eviction Proceedings? Are you familiar with the current landlord tenant laws in your state or your country? Do you know what actions to take when a tenant refuses to pay the rent? Do you have the stomach to proceed with rental property eviction?In the course of 14 years as a Landlord, I have to evict 3 tenants, none of which was a fun and easy process, and during this time, I have lost approximately 10,000 US dollars. Being a Landlord is not a Cake Walk and requires thorough tenant screening for ALL prospective tenant applicants. Sure it’s a paper loss and I can deduct all losses/costs from my federal income taxes which is a blessing, but it’s still money out of my pocket that I will probably never see, even though I have been awarded judgments from the court against all three previous tenants. Do you have Sufficient Cash Flow to offset your Loss/Expenses You must factor in at least 3-4 months out of the year that your rental property will remain vacant. Tenants leave for various reasons (evictions, move, etc). You need to make sure that you have the cash flow from your current income to be able to pay for all unknown costs associated with owning a rental property. If your rental income is totally contingent , upon your ability to be able to pay for all your monthly expenses and bills, then you have no business owning a rental property. You need to be able to pay all expenses without rental income. A rental property can be a very rewarding and successful business if you do the required and necessary homework before you put down cash on the property, but also requires effective decision making on your part. Owning a rental property can help you offset costs due to federal tax laws and be a form of income in your retirement planning days. But if you do not develop the self discipline that is required in your rental property investment, you could be setting yourself up for failures that may soon follow. Identify Your Short and Long term Real estate investing Goals Just as with any financial plan, you need to develop a smart goals approach to any short or long investment you are considering. Are you looking at land, commercial properties or residential living units? All three have different strategies and risks associated with each. Especially in a downward global economy; gone are the days when you could purchase a foreclosure, fix it up and flip it, turning over a sizeable ROI (return of investment) in 90-120 days. Real estate investors who bought investment properties at the end of the real estate economic boom in 2006, suddenly found themselves holding onto properties largely overvalued, that these speculator investors could now, no longer market and sell themselves. Unless these investors had the financial resources and a strong money management plan in place, many of these first time real estate investing newbies, ended up foreclosing themselves, adding to an already troubling housing industry. Do you have the stomach and the financial resources and wherewithal to hold onto your properties longer than anticipated? If not, maybe right now is not the time to purchase. Knowing your risk tolerance, and planning for the unexpected is the only way you have a real chance in how to succeed , in a very uncertain and volatile economic climate. Remember: ”The only Unfulfilled Goals in Your Life are the Ones you Never Attempt” |
seems to be the buzz word today, especially in lieu of the terrible global economy and devalued home properties, including the foreclosure housing mess across the country here in the United States.
