Real Estate Investing
MODULE 6: Making Money in Real Estate, Lesson 5
10 secrets of Real Estate Investing
Adnan Ul Haq
Module 6:Making Money in Real Estate
10 secrets of Real Estate Investing
Adnan Ul Haq
The real estate market has been on an upswing for years, and if you're looking to get in here, then now might be your chance.
This is the right time to make a real estate investment if you are the one planning to invest. Here are some amazing secrets of real estate investment that we are going to reveal today:
Live in the Property that you Buy
If you live in the house you have purchased, then it will help you escape many expenses. This will give you an opportunity to see what issues may arise with construction, document preparation such as taxes, and, more importantly, how much money can be saved by living there.
Focus on the Figures Rather than Emotions
Most of the time, you miss good investment opportunities because you become emotional. For instance, as soon as the market value drops, you sell the property right then, which will obviously cause you loss. So, you need to focus on the figures and numbers instead of your emotional decisions.
In order to become a successful real estate investor, it is important for you to understand the different factors that go into property value. One of these factors includes the "cap rate".
This term refers specifically to how much profit an investment makes in comparison with its purchase price. This can be used as a reference to determine whether you should or shouldn't sell the property.
Check the Intrinsic Value
The intrinsic value of the property depicts how much income it will generate throughout its life. The intrinsic value should be greater than the present value of the property. Essentially, the future value should be greater than the purchase price.
The future income potential of any asset should be greater than its purchase price, which makes the calculation of intrinsic value very simple.
You need to check whether the property that you are buying has a lot of maintenance charges or not. This is because if these charges are higher, then you will face major difficulties while selling that property.
Check the Risk Profile of the Tenants
You need to make sure you're investing in a place that won't leave your security vulnerable. You need to check the risk profile of the tenants that reside in the property that you are buying. You need to check whether those tenants will leave the property, or whether they will attempt to confiscate the property, etc., so that your investment is secure.
Market timing is very important because it defines whether you will gain profits or face losses. Like everything has a cycle; similarly, real estate also has a cycle. At a certain point in time, the prices are increasing while at another time the prices are decreasing.
You should buy when the prices are lower or are expected to increase, while you should sell when the prices are at their peak. So, you can earn a better profit, and all this is done when you have thoroughly analyzed market timings.
Don’t Be Scared of Calculations
People are usually hesitant about the facts, figures, numbers, and calculations involved, due to which they face losses. Or, you don’t read the agreements properly, and the sight of it makes you go crazy.
However, the numbers are actually very simple. These things are not very complex, but you only need to understand them properly. If you still think that you're not good at figures, then you can consult an accountant for this.
Estimate the Walk Score
You need to check whether the basic facilities like hospitals, schools, universities, etc., are in near access or how they can be approached. For instance, is there a ring road or any other development connected to travel to the main city? All such features lead to an increase in the price of the investment in the long term.
Work With a Trusted Advisor
It is very important to work with a trusted source. Most of the frauds are conducted by agents only, so if you are not working with a trusted source, you will most likely get caught up in these frauds.
You need to avoid fraudulent agents and work with reliable agents who have been working in the market for a long and those who can be trusted and communicated reliably.
Always Start With a Small Investment
If you are a beginner and want to start with a very big investment, the margin for loss is huge. But, on the other hand, if you make a small investment and get a huge experience from it, then it is actually the best thing. You can use your experience further and invest in more properties.
Don't be impulsive and start following people around. When the prices go down, a lot of people get scared and sell their property for less than it's worth. But if you've done your research before buying, you don't need to worry. You should be confident that the price of your property will go up in the future, and its value will appreciate.
Remain Open to New Options
Always keep seeking new avenues of investment. Most of the time, you fix your mind that you will only invest in a certain location or in a certain kind of property, but actually, there are other emerging lucrative options as well. Area of competence is important but don’t close your bain towards other options.
You should always research thoroughly if you want to invest in real estate and take precautions before making an investment.