Anyone considering an investment in real estate is well aware that such an investment requires a lot of money at the outset. If you're putting your hard earned money into a real estate investment, you need to be as confident as possible that there will be strong returns.
Succeeding in real estate investing is about avoiding the most common pitfalls that minimize ROI or render returns impossible. The following are six factors that frequently cause real estate investment upsets when overlooked:
Understanding the ratio of renters vs. owners
If you're planning on buying a property and renting it, you need to be aware of the ratio of renters to owners in an area.
In areas where it's very easy to acquire financing to purchase a property, you will find that there are not many renters around. This will make it difficult to find tenants for your rental properties.
Some investors make the mistake of investing in real estate as soon as they find a property that they can afford. However, it's often wise to take a step back and put some thought into saving up some more money to invest in a more desirable or marketable property before making an investment in real estate.
Considering vacancy rates around rental properties
If you've found an outstanding deal on a property that seems too good to be true, it's a good indication that no one wants to live in the area.
Keep an eye out for "for sale" signs and vacancy notifications to get an idea of how in demand real estate is in the neighborhood and of how quickly it goes on and off the market.
Knowing an area's demographics
The demographics in the area in which an investment property is located dictate whether or not a property will be affordable for those interested in living in it.
What are median household incomes in the area? Are neighborhood residents primarily young professionals or families? This information is important when it comes to investing in real estate.
Accounting for hidden expenses
Never forget that the sale price of the property you buy won't be your only expense. You'll also have to pay for utilities, taxes, legal fees, advertising, supplies, and more.
Developing a long term plan
Investing in real estate is not a get rick quick scheme. It can take decades for a real estate property to appreciate significantly in value.
Any investment in real estate should not be made before a detailed, long term plan is developed that indicates a high probability of continued increases in value into the future.
For more information about investing in real estate wisely, speak to a company like Jakob Pek Fund.