Real estate is a prime investment opportunity, but you have to approach it in the right manner and have a long-term strategy in place if you want to make a success of it. The property market can be a volatile place and if you mess up, you could quite easily lose a great deal of money. However, there are ways to maximise your investment and reduce the inherent risks involved, so if you are considering investing in real estate, read the following bits of advice.
Investing in the Wrong Area
Real estate prices vary across different areas. For example, commercial real estate in Montreal might be more expensive in the city centre, but if you look in outlying districts the prices will be a lot lower. The same applies to residential real estate. Some areas will be in demand whereas others won’t be popular at all. The problem comes if you invest in the wrong area because you will struggle to make much in the way of capital growth.
Buying the Wrong Property
Once you have pinpointed the right area for your investment, it is time to find the right property. If your plan is to let the property out to tenants, you need to be clear about what type of tenant you are hoping to attract and what the potential rental income is likely to be. For example, there is little point in aiming for short-term vacation tenants and then investing in a property in a non-tourist area.
Not Managing Your Business Properly
A property investment business is like any other: if you don’t manage it correctly your business will soon fail. Ideally you should have a business plan in place before you invest in a property. Be clear about what you hope to expect and draw up some cash-flow calculations that take into account rental income void periods, fluctuations in interest rates, and anything else that is applicable to your personal business plan.
Being Inflexible
To be a good businessman or woman, you need to be flexible and roll with whatever comes you way. Don’t get too fixated on things such as rental asking prices. Just because a letting agent told you it was feasible to ask a certain amount for your property, be prepared to drop the price slightly in order to attract a reliable, long-term tenant. The same applies once you have a tenant in place. If the tenant asks you to make a small improvement, it might be better to spend the money and keep them happy, than say no and risk losing them.
Failing to Keep Accurate Property Records
Maintaining accurate records is an absolute must-do if you run a property investment business. Records are important for a number of reasons, not least the fact that you may have to produce them if the Tax Man comes calling. It isn’t difficult to keep accurate records if you are well organised. There are lots of property management software packages on the market today to make it easier.
If you do make any of the mistakes listed above, try not to worry too much. As long as you learn from them you will survive.
