Important Tips to Successful Real Estate Investing

All real estate investors learn that there are many guidelines which are important to success.  Here are a few:

l.  Compare Property Values and Rents.  The best measure of a property's value is often the sales prices of nearby properties.  The same goes for area rents. 

2. Specialize in Something You Know.  Start in a market segment you feel somewhat comfortable with.  You may decide to focus on single family homes, apartments (both small and large units), starter homes, foreclosures, fixer-uppers or commercial properties.  Whatever you decide, study and learn all you can and focus on what you are doing. 

3.  Know the Costs Going In.  What are the operating expenses?  Loan payments?  Vacancy costs?  Taxes? What does the cash flow statement look like?  Also, determine how many repairs and the cost of them will be before you complete the deal. 

4.  Assess the Tax Situation.  Taxes are an integral part of successful real estate investing, and they often make the difference between a positive cash flow and a negative one.  Always know the full tax situation and see how it can be manipulated to your advantage.  It may be a good idea to consult a tax advisor.

5.  Investigate Insurance Coverage.  Be sure you are able to obtain proper insurance before you go far with the deal and certainly determine what the cost of it will be. 

6.  Inspect the Property.  Make sure that you always perform a thorough inspection of the property before buying it.  If you are not an expert on construction, it is most likely a good idea to hire a professional inspector to examine the property both inside and outside.  Also, it may be to your best interest to hire a structural engineer to check out the foundation.

Real estate investing can be one of the most financially rewarding things you can ever be involved with.  However, without using caution and good sense, the investment may hurt more than help you.

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        More Ways to Eliminate Risk in Real Estate Investments

Unbelievably, many first time investors are willing to part with their hard earned cash without taking the time to study their investment.  They rely on gut feelings.  Before you risk your investment, take the time to learn all you can about your market. 

l.  Forgetting You Are Buying a Business.  Owning investment property carries a great potential for creating wealth. However, with this potential brings many difficult and important decisions.  Running a business requires lots of thought, planning, imagination and lots of good ole hard work.  Are you prepared for this?

2.  Avoid Negative Cash Flow.  You don't need a property that will eat your principal each month.  Don't think that just because it will lose money at first means it will suddenly begin to make a profit.  In most cases if you don't determine it will make profit from the start, it may never show a profit.

3.  Charge Fair Rents.  Vacancies, turnovers and lease terminations will be one of your biggest expenses.  Charge fair rents and treat your tenants with respect and respond quickly to their needs.  It's a lot less costly in the long run to take care of the little problems before they become big problems. 

4.  Get a Bill of Sale For All Property Involved.  Many types of personal property (appliances,furniture, fixtures, etc.) can be involved in an investment sale.  Be very detailed and know who owns what.

5.  Select Qualified, Good Tenants From the Start.  Take the time to check references.  And be sure to check with previous landlords. It's always best to not rely entirely on the last landlord the tenant refers you to. This landlord may tell you anything to get rid of the tenant approaching you.  Go back to the landlord the tenant had before where he currently lives.  A credit check is also a very important consideration.

6.  Don't Spend Positive Cash Flow.  Be sure to re-invest your cash flow back into the property by repairs and upgrades and/or pay extra on the payments you owe on the mortgage.  This decreases debt load and increases your equity which builds your net worth.  Many new real estate investors try to live out of the cash flow and this pulls many under.

7.  Have a Good Lease and Enforce It.  If the rents are due on the first of the month, don't wait until the 15th of the following month to find out why the rent hasen't been paid.  Don't let a tenant convince you they had other bills to pay before paying you.  Don't let their problems become your problem.  Remember, this is a business.  Run it like it is.

For any questions or help concerning real estate in Montgomery, Prattville, Millbrook, or Wetumpka, Alabama call Jim Vines at Vines Realty.