Tuesday, February 4, 2014

How To Get Rich - Know Rental Real Estate Realities

Do you think all properties will make you money ?

Do you think choosing revenue real estate is easy ?

Truth is, most properties could end up loosing you money !

Revenue Real Estate Is A Business

Every revenue real estate option you are looking at is an individual business. Each property you consider buying must be profitable from day one or you shouldn't buy it.

This is where most novice real estate investors make their critical mistake. They do not properly analyze the rental market of the areas they are looking at buying. The rent you are realistically able to charge should be enough to cover all expenses plus put a reasonable amount of profit in your pocket each and every month.

My first step when looking at individual revenue real estate opportunities is to run the numbers. This is done well before an initial drive by of the properties. Your new business opportunity must be profitable. Period.

You Are Not Living In It 

Remember,  revenue property is an investment. You are not going to be personally living in it. This means that you should never over renovate with options you would like in your personal home.

Tenants will almost never treat your property as good as you would. This means that damage will occur and you must expect it and build it into your costs of doing business. A partial renovation may have to be done each time a tenant is changed. This is reality.

The property should be renovated to the point where it is appealing to your potential tenants. Over renovating can cost you a lot of money over the long term. Be careful.

Know Your Codes And Rules

Every area has different building codes and regulations. Before you start looking at an area, know all the rules. Knowing these rules ahead of time will help you avoid potentially costly surprises that could turn your new opportunity into a money loser.

Also, insurance companies have their own rules and regulations that you must follow to be insurable. This is another area that you must be prepared for. If your property is not insurable you risk losing everything. Not to mention you would never be able to get mortgage financing from any financial institution.

What To Do

Real Estate investing can be a complicated but yet very rewarding business opportunity. If considering revenue real estate for your future, be prepared for a lot of learning. Governments, insurance companies and financial institutions are always changing the rules. You must keep up to date with all of these changes.

Insurance companies are in business to make money. Financial institutions are in business to make money. Governments are in place to protect the tenants' rights. To be a successful real estate investor, you must find the balance of being profitable while providing clean safe housing alternatives for your tenants. A very challenging but extremely rewarding experience.

As always, I welcome your comments and suggestions for future topics.

1 comment:

Expatriate Tax Services said...

Rental real estate is still a profitable business indeed.