(Newswire.net — April 6, 2016) — Investing in real estate is beginning to rise in popularity as the economy seems to be recovering from the housing crash of 2008. When done correctly, real estate can be a very promising investment that can improve revenues exponentially.
But the thing about real estate is that it’s a fairly volatile investment. Every year, the market shifts, and your strategy must shift with it if you want to make a profit. As you consider making investments in the 2016 real estate market, here are a few things to consider.
1. Finances Must Be In Place
At the beginning of your investment journey, get your finances in order and set goals that you want to achieve throughout the process. Be realistic with how much money you need to spend and the profit margins you want. Remember that in these uncertain times, you can’t always rely on the bank to pull you through your financial difficulties, and having a sizeable savings account to help up front can give you stability in an otherwise volatile market.
As you run your financial analysis and set your goals, consider figures like net income, cash flow, return on investment, cap rate, cash-on-cash return, and total ROI. This will help motivate your efforts and avoid putting you in unnecessary debt.
2. Rent-Estate is Hot
Rent-estate is the term brokers are using to describe the sweeping demand for rental properties. In 2016, investing in a rental income property can be an extremely profitable investment based sheerly on demand. If you can get your hands on a reasonably priced rental property in a popular location, you can expect an excellent ROI.
3. Utilize Your Research
It’s good to purchase books, listen to seminars, attend conferences, and buy whitepapers to further your knowledge of the craft, but make sure that education isn’t wasted. After you learn about a certain topic in your book, try it out.
Again, use this knowledge to set goals for success. It’s really easy to focus so much on the research aspect of real estate investments that you never get around to the actual investing part.
4. Only Buy When the Seller Is Not Motivated
Motivated sellers are notorious for getting a high asking price. These are the sellers that invest time and money into the home-selling process and actively promote in order to get the best deal. When you come across these sellers, the property for sale usually isn’t worth the effort it would take to get the seller down to a more reasonable asking price for your financial goals.
5. Shop in the Right Places
Every year, the best prices and returns for homes vary by location depending on the area’s current economy. Right now, some of the best places for real estate investment include Grand Rapids, Michigan and Tampa, Florida. Research the changing factors each year before making an investment.
6. Understand the Risks
There’s a good degree of risk involved with this form of investment. If you’re interested in flipping houses for profit, the biggest risk is that you’re likely to put more money into the property than you’ll get out of it.
Another risk involves the volatility of the market. If we see another economic downturn, the result will be banks that are unwilling to lend and housing prices shifting in a direction you may not like. Knowing these risks and more is integral to having a good experience with your investment.
7. Browse Extensively Before Buying
It takes experience to make a good investment. Before snatching the first property that comes on the market in your price range, stop and observe. See how the market plays out, and how other, more experienced investors handle the purchasing of investment properties. After you’ve browsed through your options and seen a few lucrative deals take place, you’ll be ready to find your own investment property.
8. Consider the Taxes
Like any big purchase, homes come with considerable taxes you’ll have to pay. The amount owed in property taxes will vary by state, but you can guarantee they won’t be cheap, and this is a cost you’ll have to pay by the deadline, whether or not you’ve managed to make any money off your investment.
This year, play it smart with your investments. Tread carefully around areas of volatility and make safe, smart investments. It’s difficult to predict when the market will take a turn for the worse, but being prepared from the beginning is your safest bet.