There is no blueprint for real estate investments. Many entrepreneurs tend to become better investors over time. Success comes to those who heed the advice of industry aficionados, time their purchases just right, and understand the intricacies of the property market. Cheap investment tips are a dime a dozen, but there are nuggets of gold in the mix too.
As a novice to the scene, it’s easy to become overwhelmed with the complexities of the market. Leading property mogul, Ofir Eyal Bar successfully developed a multi-million-dollar property portfolio and he regularly shares insights into his investment strategies. He is a firm believer in buying, rehabilitating and reinvesting in properties. He, along with other property gurus advises clients to follow a comprehensive approach to property investments.
Mix it up – diversified portfolios
Many people with property holdings tend to restrict their investments to areas they know. This practice has merit, although it is also limiting to a degree. By tapping into different markets in different geographic territories it is possible to enjoy the benefits of a diversified portfolio which offsets local market volatility. It’s equally important to ascertain what type of property purchase you are aiming for. Vacant lots of land? Commercial property? Residential property? Rural or urban?
These questions can have dramatic implications when it comes to resale, rental, and ROI. If you’re opting for rentals, be careful not to overextend yourself by relying too heavily on renters if you cannot sustain the mortgage repayments. There will invariably be dips in the market, and periods where rental properties remain vacant for some time. Be sure to budget for this scenario.
Understand your market well
There is no substitute for good information in the property market. You will regularly have to conduct lots of research to gain a better understanding of the market. Stay up-to-date on the latest trends and developments, comparative statistics, interest rates, foreclosures, crime stats, new developments taking place, et al. A knowledgeable investor is always a better investor. Your success hinges upon the amount of work you put in. Take time to research the market well.
Property is a big-ticket purchase. The sticker price is one of many cost considerations to bear in mind. Once the title deed has changed hands, the real work of upgrading and rehabilitating the property begins in earnest. In this vein, it’s not necessary to plough tremendous funding into fixer uppers. The costs can quickly spiral out of control, making your initial investment a loss leader.
Every penny spent in rehabbing a property should be evaluated against the potential benefits i.e. payoffs. If a multiplier effect is not at play, the rehabilitation efforts become less appealing. It’s not necessary to spend top dollar on accents, furniture, finishing, and accoutrements. Affordable renovations with aesthetic appeal are much more sensible than wasteful expenditure.
Watch out for maintenance-intensive expenses
As a landlord with rental properties in a portfolio, you will want to pay particular attention to several issues. Heating and AC units with leaks, damage, or inefficient systems will end up costing you a small fortune in the long run. Rather than letting small problems become major bugbears, take care of these problems as soon they appear.
AC units can set you back thousands of dollars in replacement costs (in the absence of a home warranty plan), so too can faulty boilers, leaking toilets, old pipes, and incorrectly-sealed appliances. Be sure to conduct regular maintenance checks on all rental properties to guard against a tidal wave of repair and replacement costs down the line.
Get your bankroll in order
As with so many things in life, your bankroll a.k.a. your budget is everything. It determines what you can buy, what you can fix, and how well you can sustain yourself during lean times. Your investments are first and foremost a business activity that requires careful and methodical planning and budgeting. It is in your best interests to have a rainy-day fund set aside, and be prepared to use up approximately 50% of your gross rental income for expenses.
It’s not always possible to negotiate down on price, but try to negotiate other expense items so that the seller takes on more of the burden, rather than you the buyer. For example, you may try to get the seller to pay the closing costs of the real estate transaction, or at the very least try to get the closing costs split between you and the seller.
For more valuable information on how to save money with real estate investments, take a look at Ofir Eyal Bar’s tips, listed in his Medium blog. Many useful investment strategies are presented which can save you a fortune in the long run.