Real estate investing doesn’t come with an instruction manual, unfortunately. Many new investors can see a lot of ups and downs and learn from their mistakes, especially in their first years of real estate investing. That being said, there are so many ways to learn from the mistakes of other investors so that you don’t have to make those same mistakes yourself. Here are 10 real estate investing tips to help give you a one-up advantage over other investors. Let’s get into it!
Real Estate Investing Tips #1 – Find Rental Properties in Emerging Neighbourhoods
Granted, it’s impossible to be a fortune teller, but with easy access to so many sources online as well as great advisors in person, it is necessary to know where the emerging properties are, and where they will be.
The first step of knowing if the town or city you’re thinking about investing in if profitable or not, is doing research online. A great tool we have seen being utilized is City-Data. This site makes it easy to understand crime rates, average income, vacancy rates… and best of all, it’s absolutely free!
Another great way of finding out if a location is emerging or not is by taking a drive around town with your ‘Analytical’ hat on. Great things to pay attention to are:
- How many businesses you see coming up:
- This is a great sign of growth as others have noticed that growth and decided to test their luck in that neighbourhood.
- How many for sale signs you see:
- This can be a huge red flag. Obviously, one here and there is normal, but when you start seeing multiple houses on the same street start popping that huge sign on their front lawn, you need to be skeptical of why so many people want to get out.
- Talk to people in that neighbourhood:
- People who have lived in that town for a long time have great personal insight as to how the town has grown or diminished. Be sure to talk to multiple people though, as some long-time residents can be upset by growth and give you a biased and skewed idea of that locations population growth
- People who have just recently moved there also have great insight, as they probably have their own personal reasons as to why they moved there. These reasons could be a great school district, great walk-score, close to health care facilities, the reasons that drew that new resident in has endless possibilities, and this is great for your research as an investor!
Real Estate Investing Tips #2 – Don’t Do More Renovations Than Needed
For our next real estate investing tips, we wanted to mention that going above and beyond does not always generate the best results. When you’re deciding to flip or renovate a house, you might think going the extra mile with those heated bathroom floors or a built-in shoe organizer is worth it, but chances are what you think will be a great idea in an investment property, might not be a drawing factor that reels buyers in. It is a much better idea from a financial standpoint do what is necessary. This can be like updating the flooring and lighting and doing a fresh coat of a trendy colored paint.
The main problem with doing more renovations than needed is that the house is still within a market that eventually caps in its value. Going above and beyond sometimes (aka most of the time) costs you more money than it makes.
Even if the house is the most beautiful one on the street, buyers won’t consider it if it’s out of their price range and there’s a cheaper option next door.
Real Estate Investing Tips #3 – Make Sure You Spend Money Where It’s Needed
We can’t emphasize enough how important it is to make sure you’re spending money on things that matter. Sometimes cutting corners is understandable, but when it starts making your investment harder to move along, you end up losing money anyway because time is money.
A great example of this is how investors like to cheapenout on their properties for sale sign. If you have lived here in Canada for even only one full year, you know how crazy our weather conditions can get. I’m sure we have had all for seasons in one day multiple times already this year. Not imagine a cheap for sale sign on the front lawn. Rain, wind, snow, ice, heat, all these contribute to deteriorating your sign faster than you think it ever would. This is the first interaction a lot of passers by will have with this property too. You wouldn’t show them a messy house, so you shouldn’t show them a messy sign either.
These signs can cost about $100+ but it is an amazing investment to be able to sell properties faster than you think. There are so many other examples of things that are worth spending money on in real estate investing, stay tuned for an article breaking this down more!
Real Estate Investing Tips #4 – Give Yourself Room With Budget and Timelines
When getting involved in real estate investing, sometimes we feel like everyone we work with will want to be just as productive as we are.
Even from our perspective right now, we are currently waiting for our new office building to be ready. But unfortunately, it seems like the construction is a never ending process. Everyone is excited for the new space and we would move in as soon as it’s done, but this excitement is not always in line with the contractors ability to work even faster than they already are!
But with everything real estate, there are going to be times where timelines need to be extended, at no fault of your own! For example, if you’re putting in a new plumbing system or getting the floors or windows redone, the builders might run into more difficulty than expected, depending on the property. This means they will take longer to fix it up, which means delays for being able to get tenants or selling the property are a likely obstacle that you will face!
To avoid these obstacles and challenges, make sure you give not only yourself, but the people that are helping you. Make sure you have some extra cash to be able to cover unforeseen costs. From repairs to mortgage payments, you need to make sure you are prepared for the worst so that you can appreciate the best!
Real Estate Investing Tips #5 – Have Multiple Exit Strategies
What is an Exit Strategy and why is it so important?
- Basically, this is how the real estate investor plans on removing themselves from their certain projects. This is important because exiting a deal is a crucial time in a real estate investment. Some of the exit strategies are planned right when the investor first gets involved in the real estate market. Other times, an exit strategy is decided right before they leave the market.
- Some investors feel like it isn’t crucial to have an exit strategy as they enter the market because they do not know what to expect in that moment of getting involved. However, a massive tip and benefit, would be to establish a rough idea of an exit strategy, so that nothing comes as a surprise, as unexpected emergencies can happen to anyone so it is important to be prepared for the worst.
There are so many different types of exit strategies (hint… this is an upcoming article that will be released in the coming weeks… stay tuned!). What works best for you is dependent on so many factors, like, where you currently are in your investing journey, what your goals are, how much extra income you have on hand, etc.
As the point of real estate investing is to make profit, it is important for investors to know not only how to invest, but also how to effectively get out of that investment so that they are still able to make a profit.
Real Estate Investing Tips #6 – Screen Tenants Effectively
Something we have noticed with new investors, is that they do not take the time to carefully screen tenants as much as they should. This can cause major headaches, but it can also be avoided with the proper steps and considerations.
Before you try to find a tenant, decide who would be best for your property. At the same time, it is important to know what is selectively choosing a tenant and what is discrimination. For example, you can’t discriminate against a tenant based on, sex, race, ethnic origin, marital status, etc. This can get you as a landlord into a lot of legal trouble, ignorance is not an excuse for breaking the law!
But make sure you go through tenant screening businesses, as they have the told to analyze a tenants online presence as well as important factors like job and salary history. Additionally, you can also ask the prospective tenant if you could talk to their last landlord.
This is important because you want to make sure the tenant you have approved will be able to take care of your property as well as make timely monthly payments. You want to save yourself the headache, make sure you are thorough from the start!
Real Estate Investing Tips #7 – Know Your Goals in Real Estate Investing and Create a Game Plan on How to Get There
When people first start getting involved in real estate, many of their first goals are “I want to make money”. But this is a really vague way of thinking about all the possibilities that can come from your real estate investing journey. For example do you want to prioritize immediate cash flow? Or do you want to focus more on long term wealth? Do you want to gain wealth through home equity or quick money from flipping a house?
There are so many ways to achieve success in the real estate market, but it’s important what success means to you. Take into account your current skills and abilities as well as who is in your team. For example, taking on a massive house flipping project might not be a good idea if your whole team consists of only you, and you have no previous experience with this. A quote that really stuck with us is:
“Do not wait; the time will never be ‘just right.’ Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.”
– George Herbert
It’s important to know where your current abilities lie, it’s much easier to climb a ladder than jump to the top! By working with what you already have, you can set yearly goals of where you want to be in your investing journey. This can help keep you on track, and make sure you are always moving.
Real Estate Investing Tips #8 – Keep Proper Records
When starting out in real estate investing, it’s hard to know what documents will be important in the future and what won’t. A good rule of thumb is to save as much as you can in an organized manner, and make sure you keep it separate from your personal purchases.
Not only do you need to keep track of your records for possible legal reasons, but you also need to keep them for yourself. For example, many landlords keep something called a ‘damage log’, where they take time-stamped photos of almost every corner of their rental property. That way, if a tenant ever complains about that giant hole in the wall, you will be able to prove to them that the damage only appeared after they moved in.
Additionally, many landlords also keep records on their current as well as past tenants. This record can contain a copy of their rental agreement, a walkthrough checklist as well as records over the years of their rental payments. If the tenant complains of any issues with the property, you can submit a record for when the complaint was, when it was, what they wanted fixed as well as when you fixed it. It also helps to keep as much of this digital and backed up as possible, as it will prevent you from losing any valuable data, and help you as a landlord stay as organized as possible!
Real Estate Investing Tips #9 – Leverage the Experts
No one says you need to do this alone. There are so many experts in all the fields of real estate to help you out in your journey. Some experts you will end up needing are banks, brokers, contractors, property managers and so much more. No one is an expert at all of these different jobs, so it is important to leverage expert help, at least until you get a good grasp on things!
Additionally, leveraging experts can help make your life a lot easier. When you have multiple real estate investment properties, it becomes difficult to manage all of the tenants. By leveraging an expert like a property manager, you are able to kick back just a little, tiny bit more, which will give you time to focus on the bigger picture rather than the smaller issues of replacing a microwave.
Be sure that the experts you are leveraging are for sure experts, look at reviews and ask for references before hiring them on to your team, as you need to make sure they have their best intentions at heart and truly want to help their clients do well in this whirlwind of an industry!
Real Estate Investing Tips #10 – Join a Local Networking Group
You’re an eager investor looking to learn the best information. Although there is plenty of information available on the internet, there is nothing like face to face learning and being able to connect with other like-minded investors. If you are located in the GTHA, there is an amazing Free 90 Minute Training Class, where experienced investors will help you learn how to invest in nice homes in nice areas. Space is limited and seats fill up fast. Click here to reserve your seat now!
Getting involved in real estate investing can be daunting and overwhelming at first. Along with the tips we posted, the most important factor to become successful in this market is making sure you believe in yourself and have faith in your own abilities. If you don’t, it can make your version of success much harder to achieve. Leverage experts and place a large emphasis on learning and research in the beginning stages, can give you an insane amount of confidence to help you in your journey. Remember, It’s your life… might as well live it on your terms!