SUCCESSFUL REAL ESTATE INVESTING TIPS FOR 2020
When it comes to real estate investing, there is no second chance for a first impression. This is because the amounts and efforts put in place are immense and if tragedy hits, the losses are felt for longer times. Imagine those who invested in projects that have stalled to date, of those who built on public land or even worse those who down the line cash deficiency hit and can no longer continue with the investment. Many are looking for a silver bullet that will slay the dragon; below we’ll see on how to cut down on the steep learning curve of purchasing your first investment property. If you are not studious when it comes to investing, you are doing great harm to yourself and posterity. If you do not take up new knowledge then you will not only remain in the same position as others are advancing but soon you will be dying for using old methods. See magicians, their trickery has been advancing with ages. They have advanced from making coins disappear to appear behind our ears to now themselves disappearing, or even predicting thoughts and actions.
Once we are done with the school system education, now the real learning of life is what we should all strive to attain as long as we walk on this earth. If you do not take up new investment learning, then you will be using old methods that may not only be adequate but may be obsolete causing loss of investment. I chose to stay updated on changes in the real estate industry as a whole because I want to be an expert in my field, especially where my money is on the line. Below are key tips to note if you are looking to be successful in the real estate investment business.
- First, buy your own property.
That old term, “Do as I say, not as I do” is not nearly as influential as when you are leading by example. This is why, if you are thinking of getting into real estate investing and be successful, I would suggest that if you are renting, buy a property to live in first. You cannot be honest and true to your customer if you are not enjoying the same yourself. If you do not believe in what you doing, then how would you expect others to? Buying your own property will give you the ability to understand the game by moving from being a spectator to a player; from the stands to the pitch. The experience inside the pitch is so different from those who are spectating.
In every field, you will always be advised to be the first customer. This is for the purpose to have the intimate and in-depth interaction with the product and service. By moving from renting to purchasing your own property, you will get to know all the nuances that are involved with being a real estate investor. You will get experience in discount negotiations, sources of financing, serious discussion on payment terms, tax write off, agents’ regulations, property management processes, etc. When I talk about buying your own property first, I do not mean you have to be tied to that forever. You can get something that you can flip in the future as you move to another one or even upgrade it to a standard that you would want. This also does give you insight into flipping and property upgrading.
- Catch the numbers not emotions.
Seeing an Ad of a property that is within your budget, in your preferred location, or even in the design you like will not only make your money in the bank itch but can also cause your spine to perspire. It is known that people buy emotionally, then try to rationalize it. That is why as marketers we make Ads that will create a knee-jack reaction to your emotions and drive you to take an action. In real estate investment, your emotional triggers are not enough reasons that should drive you in to invest. You will need to go further and get to know if you are ready. Thinking you are ready and knowing if you are ready are two different things and have to do with more than having the money for it in the bank. Many so-called investors lose it all in real estate because it turns out they weren’t ready.
You will need to check your emotions at the door if you want to be successful in real estate investment. Your emotional connection will always be part of your real estate strategy. You could fall in love with a property that does poorly. You can even lose your investment by hanging on to a property that should have been sold. You might not have the best property manager or contractor but your emotions get in the way. You will need to put a controller on the limbic system of your brain that is responsible for your emotions so that you can optimize the use of your frontal lobe which is responsible for logical thinking and problem-solving. How do you know you’re ready to invest? Ask yourself a couple of questions and answer them honestly. Burn the midnight oil by doing honest research going beyond the price and transaction process. Get to know the area appreciation rate, county budget allocation on development of the area, and if it is a rental property for the development, get to know the cost of vacancy, maintenance charges, the risk profile of tenants, etc. Do not forget to factor in the cost of peace of mind too, why invest in a property where you will cost you sleepless nights having to ensure returns are not below expenses because of numerous complaints due to poor workmanship by contractors and you are required to repair now and then?
- Love the Number and enjoy Mathematics.
The majority of us, since elementary school, had a rough start with mathematics despite it being a compulsory subject. So we grew up with a negative relationship with numbers into our adult life. I do believe if you know the simple mathematics of addition, subtraction, division, and multiplication, then you are good to go in real estate investment.
For you to get to be successful in real estate, which is the road to financial freedom, you need to be very comfortable with numbers. If you have a negative mentality about mathematics, then it is time to unlearn the negative and learn the positive vibe towards it. You will need to play with numbers. Numbers are nothing more than what they appear to be. That they are just numbers and so you should not fear them. The reason why you need to love numbers in real estate investment is that they answer the untold or hidden mystery. From the numbers, you can be able to understand the past, follow through the current, and be able to predict the future trends of the project you want to invest in or already invested. Get comfortable with numbers to have the ability to read and understand financial statements such as the balance sheets, income statements, and statements of cash flow. For instance, the number 5 has no meaning until it represents the number of units occupied in a 50 unit apartment block you are considering to put in your hard-earned cash. Now the number 5 will bring a clear knowledge of a 10% occupancy rate.
- Work with only trusted sources.
In the real estate field, we face a lot of wannabes who joined in just because they heard about the commissions. Others joined in as a last-ditch effort to get out of poverty after trying all the other jobs with no results. You as an investor you need to do your homework well because you cannot be so sure of whom you are dealing with. You must probe further the financial institution you planning to seek funds from, the broker, the agent, the contractor, developer, or even your co-investor. If we do vet our house managers or security providers before we entrust them with our household or valuable respectively, why are you not thinking of doing the same before handing that cheque or signing that offer letter?
The current business has moved from transactional to the relationship. That is the reason you need to know the track record of whom you are dealing with. How do they get their earnings? Are they licensed? In Kenya, one has to have an E.A.R.B certificate to professionally practice being an agent. Having been successful in other fields is not a guarantee that they will replicate the same in real estate investment, the market and dynamics are different. What is their drive, do they see you as a person or dollar sign after sells. What is their source of information that you too can go and verify? Credible sources do produce credible results.
- Start Accumulating.
I earlier stated that our first step is for you to buy your property. This first step can be considered as a building block of starting small. As a journey of a thousand miles begins with a step, the same applies to real estate investment. To reach the level of ownership of vast parcels of land or apartment complexes start by buying the eighth size of the plot or the studio room to rent out. Real estate investment no matter what size of investment done is never small as many may think. Starting small in real estate does not mean small since the resources and efforts spent are not. When it comes to investing, you need to think big. Break your big dream into small goals that can be attained in bits. Attaining the small success keeps you moving forward.
When you get to have the financial backing, do not run away from the property advertisement. If you cannot get in investing in physical real estate you can buy real estate investment trust (R.E.I.T.s), that allows you to invest in real estate. You can opt to invest in a rental or flipping investment. Be watchful on flipping since it is not as it appears on TV. The cost implication can be high and miscalculations can do greater damage.
- Real Estate Investment is a Business of Patience.
One of the most important qualities needed for success in the real estate business is patience. Without it, success is almost impossible, and constant frustration is inevitable. Some transactions take years to conclude and some a few months and others a few days. I like to always tell all those who come for real estate consulting services, that real estate investment is a business of patience despite the figures that are mentioned during transactions. Without patience in real estate investment, you mind find yourself either being quick to sell off or too fast to buy. You need patience to study the market trends to know if it is the time to invest in rental houses or if it is plots of land to invest in if it is stand-alone or apartments. Selling to fast might make you lose future earnings that might have been earned due to property appreciating in value. If you do flip fast also, you might end up losing on the rental income that can be good passive income to run monthly operations.
Do not get in real estate with a mentality to get rich fast since you will burn your fingers and there is no reverse gear on the property. Real estate is believed to be dynamic with a breathing force. Never rush in to purchase too, you will end up buying without doing enough due diligence hence end up buying either public land, as we can see in our country, or even property with a dispute in court or bank loan against it. Remember, if a deal seems to be too good to be true, then it probably is. Give yourself time to check out all the red flags that might be missed if done in a hurry. Take time to scout around, you might find a better property or similar at a better price. In 2020, real estate with its dynamics might threaten you if you thinking to invest, but you will need to adapt to be successful.