Given how profitable good real estate investments can be, it’s not hard to see why so many investors are drawn to them. However, as is the case with other types of investments, success is never guaranteed in real estate, and there are a number of reasons for which certain properties fail to generate the desired profits. Since a considerable amount of capital is at stake with most real estate investments, it’s only natural that first-time investors would want to minimize risks – and with the following tips at their disposal, they should be able to do just that.
Consult with Seasoned Investors
New investors often find themselves wondering, “Is real estate a low risk investment?” Unfortunately, this isn’t really a “yes or no” question. Depending on the circumstances, the amount of risk real estate investments carry can range from “virtually none” to “quite a bit.” This is among the reasons it’s important for fledgling investors to consult with experienced pros before making any big purchases. For example, if any members of your family or social circle have experience investing in real estate, you’d be wise to seek their guidance in advance of proceeding with any investments.
You can also gain valuable knowledge and insight from working with a professional real estate investment company. The right company will help you locate sound investment opportunities and show you exactly what to look for in an investment property.
Consider Real Estate Crowdfunding
The more capital you pour into an investment, the more you stand to make – and the more you stand to lose. So, if you’re understandably hesitant to put forth massive amounts of capital, real estate crowdfunding may be right up your alley. Per the name, this practice entails pooling your resources with other investors and investing in properties that are recommended by people who specialize in seeking out safe investments.
Of course, since the risks are shared, so too are any profits your investments generate. And with multiple investors, you’re likely to see much lower returns than you would on solo investments. Still, newer investors who are just learning the ropes can gain valuable experience from taking part in real estate crowdfunding.
Have All Potential Investment Properties Professionally Inspected
Under no circumstances should you invest in a property that hasn’t undergone an inspection from certified professionals. Some sellers have no qualms about actively concealing problems with properties, while others are simply unaware that certain problems even exist. And as an investor, discovering pre-existing issues with a property long after purchasing it is among the last things you want. So, no matter how well-maintained or immaculate a property appears to be, make a point of insisting on a formal inspection.
Any seller who attempts to dissuade you from having a property professionally inspected should be regarded with suspicion. Even if their goal isn’t to hide problems from you, their aversion to an inspection certainly suggests otherwise. If the seller persists in refusing an inspection, make it clear that any deal the two of you stand to make hinges on an inspection taking place. Should this fail to persuade them, simply walk away from the deal and set your sights on other investment properties. The more a seller pushes back against an inspection, the more suspicious they are – and the more likely they are to be hiding problems.
While not wanting to make waves with sellers is perfectly understandable, you, as the investor, have nothing to lose – and much to gain – from an inspection taking place. If an inspection reveals problems with a property that even the seller was unaware of, you’ll be fully justified in requesting a reduction in asking price. Once the inspection has been completed, contact various contractors and obtain estimates for any repairs or renovations the inspector deems necessary.
Then, should you still be interested in moving forward with the deal, request that the seller deduct the cost of repairs/renovations from their asking price. Should the seller prove unamenable to this perfectly reasonable request, simply walk away from the deal. Anyone who’s unwilling to make concessions in response to problems with their property isn’t worth your time.
Research Housing Demand
If you’re interested in purchasing a rental property, it’s imperative that you take the time to research local housing demand. For example, if the property in question is located in an area with a shrinking population and waning demand for housing, you’re unlikely to see your desired ROI. On the flipside, if a property is found in a bustling area with massive growth and ample housing demand, this is likely to be a much safer (albeit much pricier) investment, even if the property itself could use some improvements. No matter how nice or amenity-laden a rental property is, its location has the power to make or break its ability to generate a profit.
There’s no such thing as guaranteed success when it comes to real estate investments. While some investments carry far less risk than others, investors expecting a sure thing are liable to be disappointed. So, if you enter the real estate game expecting to generate massive returns overnight, you’re likely to be surprised by your lack of immediate success. Furthermore, if you begin investing in real estate without putting in the necessary time and effort to reduce risks, you may wind up losing a lot more than you ever stood to make. Investors looking to keep risks to the barest of minimums can benefit from the pointers outlined above.