Even when real estate markets are in slow times, and prices are depressed, good real estate investors can still make great profits. Here are 10 tips to help you become more profitable, in any market trend.
1. Real estate markets run in curves. Prices of homes cycle according to the income of people in the area. To evaluate your potential market, don’t only look at what homes are currently selling for, but study people’s reactions to those prices. If the general consensus is the home prices are getting out of control, you may be looking at market at the top of the curve.
2. As an investor you want to find markets which are starting to move up the investment curve, so you can sell towards the top. Research your market carefully, looking for the areas of town that are one the rise. Also watch for markets near these areas which may be on the low end of the curve, and getting ready to start an upward trend again.
3. Make sure you understand your market. Are you buying rental properties for young adults? Are you buying vacation rental properties? Are you buying homes to fix up and resell to families? All of these properties have unique needs, and different market pressures. You need to evaluate the expectations of the renters and buyers in your markets to make sure the property meets their needs.
4. Step away from your own area. Many times when your local market is having a down swing in real estate, other communities in neighboring states, or possibly in other countries are in an upswing, and prime territory for real estate investment.
5. Set your budgets carefully. On any real estate investment, you need to set your budget so you can get a satisfactory return on investment through either reselling the property, or through rental income. Evaluate the trends in the market as you are setting your budget, to make sure the purchase allows for expected occupancy levels, or changes in value.
6. Research upfront costs in the market. You may be familiar with closing costs, insurance fees, documentation costs for your area, but when you step outside of your home town, you must research. Costs can increase greatly in different communities, especially when you venture across country lines. Some countries, like Germany have fees approaching 20% of your purchase price.
7. Check on your Capital Growth potential. What direction is the real estate market moving in your targeted community? You’ll need to project the capital gains you expect to help determine the potential profitability of the property. Evaluate real estate projects which are underway, and how they might affect your purchase. Buying rental property in a community with many new apartment complexes under construction, could quickly change the monthly rental prices.
8. Explore your costs when selling a property in any new market. Capital gains taxes vary widely between countries, and sometimes even among different states. This is a critical piece of information in your profit potential.
9. Study your potential profit margin. For rental property use estimated occupancy levels, and rates to estimate your potential income over the time you will hold on to the property. Will it produce a positive income? Figure the same for properties you plan to resell. Estimate the potential sales price after renovations, and then figure backwards using your budget estimates, to determine an appropriate offer.
10. Real Estate investing is often a long term investment. Many times property becomes the most profitable after you have held onto it for several years. Unless you are buying property for flipping, you must make your plans for a longer duration.
Following these steps can help you evaluate properties in any location or market conditions, and keep your real estate investments profitable.
Comments on this entry are closed.