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4 Growth Tips For New Real Estate Investors

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All phases of the property cycle deliver buying and selling opportunities for astute property investors. As a new investor, your knowledge and network, i.e., connections with professionals in the property market, are your guiding forces when buying or selling houses. When you’ve gained experience, you can use your proven methodology and risk profile to determine your next moves in the property market.

Property – A Safe Investment

While you might have heard that real estate is the safest form of investment, many people make bad decisions and lose money.

For many who get into the business with the sole intention of making money, it’s easy to lose focus and get sidetracked from what rental properties are for—providing shelter to people who don’t have their own homes.

If you’re starting as a property investor, don’t get too distracted with how much money you will make from the activity.  We urge you to follow these recommendations to reach your goals and be proud of your investment choice.

Start Small, Do It Locally, Grow Slowly

The first thing you need to keep in mind is that you have to keep everything in perspective. While it’s easy to believe you can make huge profits overnight, in reality, there is no such thing. It makes great headlines, but every business or investment success is years in the making. To weather market fluctuations and move ahead in property investment, you will need your resources, education, and experience.

The first property deal

The worst thing that can happen to you is that your first property deal is one out of the box, i.e., you get lucky early on in your investment. If this does occur, be wary and avoid thinking you’re untouchable and that whatever you do, every property investment decision will work out.

See your luck for what it is – and use good judgment in your real estate investing transactions.

Start small with one property deal at a time and buy in your local area, where you know the basics of location and which areas are average, reasonable, and top-rate.

Experience is earned

With experience comes confidence, and you will know you’re at the point of being able to take off your training wheels when, at a moment’s notice, you can, in your head, calculate the yield of a property. At this point in your investing career, you may be ready for other investment strategies and investing outside your local area.

For example, most investors start with a modest ‘buy and hold’ property that breaks even, i.e., the rental income covers expenses. Over time, property values increase, and with the mortgage reducing, equity grows. Using equity as a deposit for the following investment property means growing small and ‘organically.’

However, Rome wasn’t built in a day, and neither should your investment portfolio if it’s to stand the test of time, i.e., perform in all stages of the property cycle, whether it’s a boom or a bust.

One step at a time

The point of starting small is to learn all the know-how of real estate. If you start handling too many projects at once, you will never be able to carry them off. Use one strategy to get established, then consider other options. For example, use the buy-to-rent strategy and then, later on, consider the do-up property for holding and adding to your property portfolio or for sale for a profit.

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Even seasoned real estate investors have difficulty handling multiple projects using different strategies simultaneously – unless they are professionals and it’s their ‘job.’ So, you should grow at your own pace and take things slowly. There is nothing wrong with closing only one project if you are learning.

Understand The Business, Engage Experts

Property investment is a business insofar as whatever you invest in, and the overall portfolio must be sustainable with ample cash flow and asset growth, i.e., capital gain in property value. Just like a business, you need to use expert service providers.

If you’re not an accountant and not good with numbers, do not manage your accounting and tax returns—use a qualified practising accountant. Use a lawyer for the property transactions. Some new landlords think managing rental properties is a passive role; however, it’s far from it.

For example, a property management firm needs to know the clauses of legal contracts such as leases or tenancies. They also need to do resite visits and provide status reports on the property, i.e., maintenance requirements and compliance with the lease or tenancy rules and regulations. If you’ve purchased a flat, condo, or apartment in a block, there’s the body corporate, apartment or condo association, and a specific fire risk assessment for flats.

To fall behind in these areas could be disastrous and life-threatening. For example, asbestos is still a significant health concern, and if you’ve got a property with it, you will need a plan to maintain or remove it safely. Therefore, don’t rush in; take the do-it-yourself approach, where there are legal and insurance requirements for the well-being of the inhabitants and the building.

Summary

Property investing is stimulating and fun. Like any investment option, there are winners and losers. To remain on the ‘winners’ side of the equation, consider these recommendations and continue reading our blog for more tips and know-how on property investment.