19 Tips for New Real Estate Investors
In today’s post, Bailey Harris shares 19 real estate investment tips on researching, buying, selling, and taxes…
Real estate can be a lucrative investment. It can also be a financial nightmare if you don’t know what you’re doing. If you have been thinking about investing in real estate or if you have already made the decision to invest in a property, the following tips will help you increase your chances of success.
Research Tips | Real Estate Investing
1) Get the lay of the land. You should be familiar with appreciation and depreciation, property management, and general real estate before making any significant investments.
2) Compare property values and rents in the neighborhood you plan to invest in. The list prices and average rents on nearby properties will give you the best gauge of what a home is worth in that area.
3) Research the neighborhood carefully before purchasing a property. Are there schools, jobs, entertainment venues, and other things that tend to draw tenants and home buyers? Does the neighborhood have a lot of crime? Are there any plans to destroy or build property in the area in the near future? These are just a few of the questions you should be able to answer.
4) Network with other real estate investors to get an understanding of how they operate. Learn from their successes and failures so that you can become a better investor.
Buying Tips | Real Estate Investing
5) Get your money together or get pre-approved for a loan before you begin the negotiating process. This will give you some leverage with the seller and make closing a breeze.
6) Always personally inspect a property before purchasing it. If you aren’t sure what you’re looking for, hire a home inspector to examine both the house and the site it’s built on.
7) Know how much money you will need to prepare a property for sale. If this number is not correct, you may never be able to sell the house for a profit.
8) Do not buy the first property you see. There are lots of houses for sale. Take time to evaluate your options and choose the best real estate investment opportunity.
9) Be a tough negotiator and get that property for the smallest price possible. The less you spend, the more you stand to earn. If you can’t get the price down where it needs to be, walk away and find a new property.
Tax Tips | Real Estate Investing
10) Consult with a tax adviser before making any real estate investments. This will help you understand the tax consequences of your purchases and turn good investments into great investments.
11) Keep good records. This cannot be stressed enough. You should document all of your expenditures, profits, and mileage. Keep all of your receipts and make notations of who, what, when, and where in case you need explanations for the IRS.
12) Hold your property for at least 12 months if you want to reap the long-term capital gains tax break. Turn it around quickly (less than 12 months) and you will pay the same tax rates on your gains as you do on your income.
13) If you buy and sell multiple properties each year, consider doing so under the name of a corporation or LLC versus your own name. The IRS sometimes classifies people who buy and sell multiple properties as “dealers.” The dealer designation prevents you from getting capital gains tax benefits.
14) Remember that tax laws can change rapidly. If the success of your investment relies entirely on the current tax code, you could find yourself in financial trouble.
Selling Tips | Real Estate Investing
15) Real estate investors do not always make good contractors. If you aren’t good at fixing or building things, find someone who is before undergoing a major improvement project.
16) Focus improvements on kitchens, bathrooms, and bedrooms. These rooms are almost always the biggest selling points in a house.
17) Market your properties in any way you can–advertisements, social media, open houses, agent tours, and virtual tours. Good marketing can help you sell your property faster and for a better price.
18) Hire a good agent if you don’t have time to do all of the work that goes along with selling a house. An experienced agent can show buyers around, negotiate on your behalf, and handle all of the paperwork so you don’t have to.
19) Be realistic about the market. If you expect to sell a home within a week for an above average price, you will inevitably be disappointed when it doesn’t happen. It takes time to sell real estate. If you are realistic and persistent, you will have a much better investing experience.
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Guest post from Bailey Harris, who writes about homeowners insurance for www.homeownersinsurance.org.
Category: Real Estate Investment Buying Strategies, Real Estate Investment Selling Strategies, Tips and Tricks
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It is true that Always personally inspect a property before purchasing it. And hire a good agent if you don’t have time to do all of the work that goes along with selling a house.
Yep, good point Brian. I bought a few houses site unseen and gotten burned before. There’s no substitute for proper due diligence.
… and I’m a big fan of delegating as much as possible. So, I have several good agents that I use when I sell properties.
~ Patrick