With the way house prices have continued to soar, many people are now considering investing in real estate as a business. But how easy is it to make money from real estate? In this article we look at the essential elements to successful investing.
1. Have a plan
The first essential element is to have a plan. Insufficient and inadequate planning is probably the single biggest mistake made by new investors. Often newbies are buying a house because they think it is a good deal and then they try to figure out what to do with it. This approach is back to front. The first step is to have an investment plan in place then you go out and find a property that fits the plan.
2. Do your homework
Investors often have to move quickly on deals, but this doesn’t mean that you can cut corners on your homework. It’s very important, and will save you money in the long run, if you methodically undertake due diligence for all deals. Have you got a builder’s report and a council property report? Do you know enough about the local market conditions? What’s your exit plan? Don’t make the mistake of some investors of having to draw on your personal savings because the house that seemed like such a good deal needs extensive repairs and you can’t sell it.
3. Get some help
It’s almost impossible to be a successful property investor without some help. Get together a team of people to support you: a trusted real estate agent, lawyer and lender are essentials. But you will also need a plumber, electrician, painter and all-round handyman. You can’t build a career as a property investor if you’re spending your time fixing a leaky tap.
4. Have sufficient cash flow
If you’re investment plan is to buy properties and then rent them out, do you have sufficient cash flow to cover all eventualities? It’s not uncommon for rental properties to sit empty for a few weeks between leases. And you may think that you have found the perfect tenant but what happens if they stop paying the rent or they trash the property? Having enough cash behind you to cover these possibilities and pay the mortgage at the same time is an essential component of successful property investing.
5. Have fingers in lots of pies
Focusing on one property or deal at a time will not turn you into a successful investor. It’s likely that a high percentage of your potential deals will not come off for a variety of reasons and so at any one time you will want to have your fingers in several pies with a number of potential deals in the pipeline.
It is possible to turn property investing into a business, however, it’s unlikely to be a get rich quick scenario. Careful, diligent planning and the help of the right team of professionals will make the difference between long-term success and failure.