Are you thinking about making an investment in real estate? If so give this a read!
Link to web article is posted below!
Here are Scott McGillivray’s tips for investing in real estate:
1: Create a Proper Business Model
“Real estate investing is like any other business. If you want to be successful you need a proper business model. Look beyond the basic costs and ask yourself some questions:
What’s the purpose of the investment?
What are some of the challenges you could face?
What are the upfront costs?
What is your source of funds?
What are the fixed monthly/yearly costs?
What are some variable costs? For instance, what about interest rates? If they change, how will you deal with it?
What are some potential problems that could derail your plans, and how could you avoid and/or fix them?”
2: Do the Math
“I always say that when investing in a property you have to fall in love with the numbers, not the house. This is probably the number one mistake rookie investors make. Calculate everything from the monthly costs, to the fixes you might have to do, to the potential profits. Crunch all of the numbers and if at the end you don’t see a plus sign, don’t do it — no matter how much you love the house.”
3: Get Pre-Approved Before You Start Looking
“One of the most important elements in the process of purchasing a property is getting pre-approved by your bank or mortgage company. Too many people start looking at properties before they know exactly what they can manage, which often leads to either disappointment or spending more than they can afford.”
4: Choose the Right Area
“A lot of new investors make the mistake of limiting their property search to areas close to their primary residence. While living close to your investment property can have advantages, sometimes better investments can be found further away. Remember that a desirable neighborhood for real estate investing is one with good opportunity for growth. Look for things like post-secondary institutions, hospitals, low rates of unemployment and great transportation systems.”
5: Determine How to Add Value
“A house that doesn’t go up in value isn’t a worthwhile investment, so think about what you can do to add value. Consider any potential updates, from general upgrades such as new fixtures and fittings to additions to landscaping and curb appeal. Weigh the costs of the upgrades against the potential increase in value to determine what you should spend.”
6: Get a Home Inspection
“Always get a home inspection. Full stop. Home inspections give you peace of mind if everything checks out ok, give you a bargaining chip if there are problems and give you a clear signal to run away if the problems are out of your league. They also clearly map out where you’ll need to invest money into your home over the next five to 10 years, which is vital for budgeting and planning.”
7: Don’t Be Afraid To Go Low
“Don’t pay too much money for a house simply because you’re uncomfortable or embarrassed to make a low offer. Someone once told me that if I wasn’t embarrassed by my offer, I had offered too much. That has stuck with me over the years and I’ve gotten some great deals because of it.”
8: Don’t Get Caught in a Bidding War
“In today’s market bidding wars are common, but purchasing a property is not a competition. If you pay too much for a property you end up losing. Never let your emotions get in the way of making smart financial decisions. Being a successful real estate investor means making intelligent, emotion-free decisions.”
9: Be Conscious of Timelines
“Time is money. Be conscious of the timelines you set because the longer you work on a renovation the more it will cost you. Not only are you paying for the renovations, as long as you lack tenants or are unable to put the house on the market, you are paying the full mortgage and any utilities. It’s a mistake I see people make over and over again and it can be easily avoided with the right planning and budgeting.”
10: Don’t Cut Corners
“DIY’s can be tempting when the cost of hiring someone extends beyond your budget, but it’s very important that things get done right the first time. Cutting corners will always cost you more in the long run. When planning out your budget make sure to account for any licensed trades you have to hire.”
11: Don’t Be Afraid to Walk Away
“If the home inspection proves to be scary, or if you find you’ve gotten into something you can’t handle, don’t be afraid to walk away. Buying a house is an emotional roller coaster and it’s really important to keep a level head and not get caught up in the emotion. Even if you’ve put some money into the inspections and other fees, it’s better to get out early and take the loss than get stuck in something you can’t handle. It’s okay to find a house and then lose it. There are plenty of other houses out there. You’ll find a property that works for you — just be patient!”
12: Talk With Other Investors
“Throughout the process, talk to other real estate investors who have been through it before. Join a real estate club or organization where you can talk with fellow investors and learn some tricks of the trade. These types of forums are great for networking and learning about the local markets.”