Are you a real estate investor? Check these 9 Hacks!

Dated: July 15 2020

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Everyone investing in real estate wants to make money – this is a no brainer. There are various ways of achieving this – renting out a property after buying the same at a reasonable price; or selling it off at a profitable price after it has appreciated.

These are the basics, but how do you execute them?

Not to worry, this article will guide you on your way to become a successful real estate investor. If you are familiar with real estate investment, you will realize that location is crucial to making the right investment decisions. This is why the first four hacks on our list will center on how to get the best property location as a real estate investor.

4 location hacks you should know.

Hack 1 – Find out the current local price trends. Doing background checks is essential in real estate. Having an idea of home prices in your area will help you to make the right investment decision. This involves comparing homes in your area to similar homes in other neighborhoods. You are looking for the trends in prices and similar vital features.

Hack 2 – What is the development potential of the area? Some newbie investors tend to be discouraged if the location of the property is not the liveliest. But that is not always a problem, provided there are viable future development plans for such areas. Will they be built in the future if there are no developmental signs of schools, hospitals, roads, restaurants, banks, and shopping malls? You can find out about this at the roads and buildings departments at the local town hall. If there are assurances, the property may just appreciate considerably over time, even if it is not valuable at the moment.

Hack 3 – Are there low-tax alternatives? The rule of the thumb is that neighborhoods that offer lower property tax rates will record higher demand. You may need the help of a professional tax assessor to assess the tax fees in the area and the last evaluation date. You should also know the date for the next tax assessment because this tends to signify higher property taxes. Overcrowded areas are not recommended, as well as areas with poor road networks and amenities. When you buy a property in such an area, the tax fees will most likely go up because the government will require taxes to fund infrastructural development.

Hack 4 – Check out suburbs and secondary markets. If you are yet to, now is the time to hit the secondary markets and suburbs. These areas are becoming increasingly popular among real estate investors. Start by assessing the development plans of the area. If there are plans to install new train stations or similar infrastructures, it means property prices will rise. Some of these areas include San Diego, Austin, Memphis, and San Antonio. These are the four location-based real estate investment hacks on this list.

Now, let us take a look at the other five.

Hack 5 – Always start small. It is common for newbie real estate investors to want to ‘hit the industry really hard.’ While this is not entirely a bad thing, it may be difficult to execute because the experience is not there. Conversely, a small and cheap property will pose no problem when it comes to management. You can progress gradually to bigger properties as you gain more experience in the business. The bottom line is to be ready to learn by doing.

Hack 6 – Understand the requirements. Never go into buying a property unless you know clearly what the deal entails. Both rehab properties and ready-to-be-used properties must be properly studied before proceeding. Where is the location? Does it need to be fixed? If yes, how much fixing? Find answers to these questions.

Hack 7 – Study the vacancy rates. What is the vacancy rate of the kind of property you want to buy? You will be surprised to find that vacancy tends to reduce the ROI on a real estate property significantly. This is why you should check the vacancy rates for the kind of property you want to invest in, concerning the neighborhood. You should aim for areas with high occupancy rates.

Hack 8 – Aim for strong positive cash flow. An investment property is a no-go area if it does not guarantee strong positive cash flow. The failure of a real estate investment to deliver a positive cashflow means the owner must source finances from other places – sometimes salary, savings, or loans.

Hack 9 – Check the Internal Rate of Return. Another vital metric to watch out for as a real estate investor is the Internal Rate of Return (IRR). According to experts, IRR is more reliable because it considers both the size and timing of the cash flows, either negative or positive, as well as sales and monthly rents. It is not relatively popular because it is difficult to calculate. You will need a financial calculator or software to figure it.

The ideal IRR is double-digit and in tens. If you end up with an IRR that appears too good, check your data or assumptions to ensure that there are no mistakes or problems. Finally, these nine hacks will make your journey as a real estate investor smooth, while ensuring that you do not make costly mistakes.

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