If you’re thinking about dipping your toe into the real estate market in the hope of boosting your personal wealth, it pays not to jump in headfirst. Before you get stuck in, put time aside to do your homework on the wider economy, as well as local market factors. These tips will help you hit the ground running.
Buy for Less Than You Sell
Duh! Selling for a profit may seem an obvious point, but you’d be amazed at how readily real estate newbies will overextend their budgets for a property that ‘feels right’, only to panic at the first sign of market decline and sell to the first buyer who makes an offer. If you set out to make money off property, you must be able to hold your nerve. A good rule of thumb for turning a profit is you should either purchase the cheapest house in the priciest neighborhood you can find, or grab property in a known up-and-coming district. Don’t make the mistake of snapping up a home in a neighborhood that has been on the up for years. Chances are, it won’t appreciate at a fast enough rate for you to make a good profit in a short period. Find something you can afford close to a posh neighborhood is often a good bet.
Leverage Social Media
While local real estate listings might show slim pickings, don’t forget that many people prefer to sell without agents, avoiding fees. Often the people who choose to go this route do so because they are confident in their property, so much that they believe it will sell itself, so if you can connect with these private sellers, you can stand to get some real gems. But how do you find them? Social media offers plenty of opportunities to meet sellers outside of the usual channels. Facebook is a commonly used platform. Join a local real estate group and keep an eye out as listings go up. You can also post your own message outlining the type of property you’re looking for, the areas you’re interested in, and what you’d be willing to pay. If anyone in the group is aware of an off-market home on sale, they will be able to send you the details.
Expect the Unexpected
While real estate is one of the more stable investments over time, you should be prepared for unforeseen challenges that crop up now and again. It pays to save enough money to bail yourself out of a sticky financial situation if need be, and to cultivate good relationships with real estate agents and solicitors you can trust, as you will not always be able to sort things out on your own. For example, you may have trouble with tenants. Your builder might suddenly go on holiday, delaying your renovation plans and costing you a fortune in rental income. You might blow your budget for unexpected and unavoidable costs. There could be dips in the market. Your land could be reclaimed by the government. (If so, make sure you have compulsory acquisition lawyers on hand.) Whatever happens, make sure you have an emergency fund and professionals on hand to help you stay the course.
Renovate to Bolster Your Investment
One of the best ways to make money flipping property is to buy a fixer-upper and renovate to increase the value of the investment. Big projects like fitting a new kitchen, building an extension or knocking out walls can completely transform your property and have a massive impact on its value, though works on this scale can be expensive, especially once you factor in labor costs. Make sure you do your sums before you start so you don’t spend more than you stand to make. Even relatively minor improvements, like retiling the bathroom or sanding the doorframes can make a good impression on potential buyers, and might make the difference when it comes time to sell.
Balance Your Books
Even if you’re fully intending to sell your property on rather than get tenants, the potential rental income should be used as a guide to how much money you should spend on your monthly outgoings. Staying below this rental threshold means that if the market doesn’t play ball and you are unable to sell the property when you expected, you’ll be able to put it on the rental market and cover your mortgage repayments and other expenses. When you don’t get the sale you want, the last thing you need is to be left out of pocket.
Whether this is your virgin property venture or you’re an established player on your local real estate circuit, these tips will help you manage risk and ready yourself for the exciting challenges ahead.