Lessons from Real Estate Pros for Aspiring Real Estate Investors
Many people make money out of real estate. It may be true that buying your first home can be a great step towards wealth accumulation. But then, one can’t grow their wealth if you only rely on your home as your single investment. This is the reason why many already ventured into real estate investing.
You might have experienced great success in purchasing your own home. But when investing in real estate, there are a few lessons worth learning from the pros. Here’s what successful real estate investors have to share from their personal setbacks.
Choose a Financing Option with a Better Return on Investment
For real estate investors, they are usually torn between paying in cash and getting a mortgage. For instance, you could be eyeing a multifamily home. You have the option to pay in cash or buy the apartment with a multifamily loan.
While some experts say buying with a mortgage makes better sense, it still depends on a case-to-case basis. It helps to weigh the perks and drawbacks of each option before you make a choice. Here are some points to keep in mind.
Buying with cash frees you up from having to pay interests and other fees. You can get a discount, enjoy a faster and simpler closing process, and ensure the house is yours right away. But then, additional expenses still apply, you miss out on loan tax deductions, and your money ends up being tied up in the property.
With a mortgage, you can enjoy tax benefits and have more cash you can use as needed. Investing in real estate becomes affordable since you only need to come up with a down payment and other fees to buy a property. Of course, mortgages can come with different fees and other drawbacks.
It only makes sense that you consider your financial situation before choosing a financing option. Choose one that can offer a bigger bang for your buck. Remember that you need to have enough to cover ongoing costs and other expenses, whichever option you choose.
Avoid Overpaying for a Property
Many newbie real estate investors would pay more just to outbid other buyers. No matter how great a property may seem, always go the extra mile to ensure you are buying one for its current market value. That being said, don’t skip inspections.
This is especially true when buying older properties. You need to consider a thorough inspection. This way, you won’t end up buying a property without knowing the potential costs of maintenance and repair.
Sure, you might already be planning on all the improvements you can make with the property. But aside from this, you also need to consider the other expenses included. So, avoid getting sucked in the bidding war and do your own research.
Invest in Professional Accounting Services
You are already busy looking for properties to buy and sell. You could also be your property’s very own landlord. But for your financial’s sake, invest in an accountant.
Taxes can make or break your yearly expenses. Failure to remain compliant can ruin your profit. You want someone knowledgeable in handling your business’s books.
You already have many things to do. It pays to hire an accountant who specializes in your kind of business. The costs will actually be an investment since you can leave your accounting tasks behind and focus on your business instead.
Be Clear About Your Emotions
Many real estate investors failed to make the right investing decisions after letting their emotions get in the way. Some bought a property they fell in love with even if their gut feel tells them no. Some also made the wrong decisions while feeling intense emotions.
It is crucial that you learn to separate emotions from your investment. Treat every transaction as an investment. If there are emotional blunders you need to avoid, this includes the following.
- Sense of impatience
- Being too honest
- Improving a property to your personal tastes
- Timing the market
- Taking too long to buy the perfect property
Have a plan before you dive into real estate investing. Do your research and work with the right professionals. Continue to educate yourself and learn from whatever mistakes you will commit.
There is no easy way to ensure success in real estate investing. But one thing you can do is learn from the mistakes of other real estate investors who are now thriving in their business. Understand the risks, your options, and know the market. Only when you practice the right habits will you start reaping the rewards of being a real estate investor.