If you’re eager to jump into real estate investing, look before you leap, recommends Oliver Somoza, the founder of Turnkey Property Pro in Philadelphia. The best thing you can do is to take your time and do a lot of research on your local market conditions for home prices and rentals before you spend your money. Specifically, Somoza suggests:
- Buy low and sell high. That may seem obvious, but it’s crucial to making your investment profitable. Find the lowest-priced property in the best possible neighborhood or find property in up-and-coming neighborhoods. Don’t buy a home in the best neighborhood at top of the market with the hope that it will keep appreciating. Buy close to the expensive neighborhoods where you can get a good deal.
- Add value by renovating. Make improvements to the property. Small renovations as well as big ones can make your property more valuable, produce additional income and attract buyers who will pay more. Add a half bathroom, upgrade appliances, fix what needs to be fixed and, if you are going to do more extensive renovations, make sure you have a good contractor who can execute your project on time and on budget. Make sure that your purchase price plus renovation costs will be lower than the highest comparative sales in the area.
- Make sure your income covers expenses. Even if you plan to sell it rather than rent it, the income that you would make if you were to rent the property at a minimum should cover all your monthly expenses. Should you not be able to sell your investment property because of market conditions, you want to make sure that you can always rent it and that you are not personally paying every month to own the asset.
- Expect the unexpected. Make sure you have a financial cushion for unexpected expenses and unforeseen circumstances. You will go over budget, you will get a repair you weren’t expecting, it will take you longer than you thought to rent or sell. Anything that can go wrong, will go wrong. And if you need help, don’t be afraid to ask for it.
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