Things to Think About Before you Invest:
Are you suited to being a landlord or should you hire someone to look after your property? Many of our clients that own one or two properties do the work themselves. By doing the work yourself you can maximize your cash flow and be prepared for a repair when the time comes. Hiring a property management company can tie up your initial cash flow and hurt your income potential. What are your goals?
Income should not be an end in itself. Plan on what you are going to do with the money that you earn. Is retirement income your goal or is immediate cash flow your goal? Do you plan on owning your properties free and clear? Do you plan on investing in more properties? By knowing your goals ahead of time you will be prepared for the road ahead.
We asked our investor clients:
What are some things that you would tell other people to expect if they are interested in investing in real estate? Here is what they said:
What to Expect:
- running day-to-day operations of your property like a business
- learning more and more efficient and profitable ways to operate
- paying to improve or repair your property
- responding to tenant inquiries and potential problems
- tax deductions and tax incentives
Specialize in what you know:
When you are doing your research, start in a market segment you know. Whether you focus on fixer-uppers, starter homes, condominiums or a small apartment building you will succeed more easily if you invest in what you know best. If home renovations are new to you, perhaps you should get your feet wet before you jump into a fixer upper.
Know the costs ahead of time:
Be aware of what the potential costs of operating a specific investment property are? What are the taxes on the property?
Know the tax situation:
What are the potential tax incentives? What can I deduct? Often it is how you file your taxes, which makes your cash flow a positive one or a negative one. See Article: What are Some Tax Benefits of Investing in Real Estate?
By researching and preparing yourself for the unexpected you will find it easier to manage an investment property. Lots of hard work at first but the payoffs are well worth it.