A couple of weeks ago, we shared some advice on the professional people any real estate investor needs. Those professionals can help any real estate investor, no matter what point of their career they find themselves in, navigate the world of investment. But that isn’t the only thing first-time investors can do. Here are a few more tips on how to get started in real estate investment, and how to do it properly.
1. Set a Budget
Many investors start out overly ambitious. That’s the first way many fail and find themselves deep in debt with little relief. But you can avoid this by setting a responsible and informed budget and sticking to it. Mortgage brokers can be invaluable in this part of the investment process, and their advice could be the difference between success and failure.
2. Give Yourself Some Breathing Room
When you set your rent prices, make sure it covers the mortgage, utilities, taxes, and insurance, but don’t stop there. Give yourself at least a ten percent windfall to deal with any repairs and maintenance costs that will invariably arise. Having the cash on-hand will keep your tenants happy and keep surprises much more manageable.
3. Get the Place Professionally Inspected
A professional house inspector is absolutely essential with any and all real estate purchases, whether it’s for an investment or private sale. Inspectors can warn you of any problems the home may have, and steer you clear of places with well-buried problems. And when you’re planning on renting, problems like code violations and other issues can cost you more than just the repairs. It can cost you fines, tenants, and even lawsuits.
4. Keep Meticulous Records
You’ll need a separate bank account for all your investment transactions, not only to keep everything straight in your own head, but to make sure everything’s okay if the tax man comes calling. By tracing all your expenses and payments, and keeping those records in hard copies (ie. not just on the computer), tax season and every other season is just easier to do. And it’ll keep you from dipping too far into any of your pots, which could cause financial worries down the line.
5. Protect Yourself and Your Partner
It doesn’t matter how long you’ve been friends or how closely you’re related, a proper partnership or joint venture agreement protects both parties if things don’y work out as planned. Be sure to include provisions for common scenarios, like if one partner wants to sell and the other doesn’t. And be sure to include something in case of an untimely death. Getting the proper agreements isn’t personal, it’s there to protect every party.
Many first-time real estate investors make a lot of mistakes that can get them in a lot of trouble. Many of these, like getting the proper agreements and keeping good records, are simple, easy, and can help everyone in the investment maximize their money. So before you buy, be sure to think about the above advice. And remember: an experienced real estate agent can help you find a property that will bring in the money you want.