The hardest part of doing anything is the beginning. Like everything else, real estate investing is a risky endeavor. Taking time to think about what types of investments to pursue or how much to invest is critical before starting a real estate investment business. However, don’t let the analysis become paralyzing. Real estate, as an asset class, represents a much safer investment in most areas than stocks. Furthermore, an investor can directly affect the bottom line of his/her investment.
Start Investing Today
Now could be the best time to start investing in real estate. With the market already substantially off of its highs, the downside for new investors is fairly low. One of the biggest mistakes new investors tend to make is paying too much or renovating too much. In this market, the low prices offer a buffer for those two particular issues.
Avoid Overpaying
Paying too much is traditionally a problem with new investors because they do not have a good understanding of the pricing in their market. This can be avoided by simply comparing lots of properties. Beyond strong pricing data, that exercise will help investors get a good understanding of their competition.
New investors also have a fear of offending a seller. This fear is simply irrational. Not only do buyers and seller rarely meet, but in this market sellers want to know that someone is interested in their property at any price. Even if its insulting, a low offer can help a seller in various ways. First, they know that someone is interested in their property at some price and second, they might realize that their home is price well beyond the market. In declining markets, sellers put their price on the market at one price. That house might be on the market for six months and by month seven better houses are coming on the market at 10 or 20% discounts. Any bid will aid the seller, so don’t be afraid to bid below the market.
Avoid Over-renovating
The other problem new investors face is putting too much money in the property. Thorough property tours will offset one aspect of this problem. Make sure that renovations reflect the competition. Investors should try to create a home that is slightly better than most of the competition, but by no means the best on the block.
The other problem is underestimating the cost of renovations. When looking for an investment in need of cosmetic repairs ensure the property doesn’t need a new roof or a new foundation. Big ticket items could seriously eat into the budget.
There is some risk to real estate investing, but no one can make money sitting on the sidelines. Start investing today.
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