1. Do Your Research
In order to turn a profit in real estate, it is important to fully understand the market and the opportunities presented. The best place to start is to identify the best market available for property investment. For example, up and coming neighbourhoods, new property developments or areas going through revitalization. While these are not the only opportunities for profits in real estate, they are certainly a good place to consider beginning.
In addition to locating the best area to begin property investments, you will also want to understand how to value property, starting with learning the values of surrounding properties and the market information. You need to become a market expert in whatever area you choose to invest in as this will help you to make the best offers possible on the properties that you consider investing into.
2. Start Small
While it is natural to want to go big when you are working on a new project, in terms of real estate investing, it is important to start small. Start with one property and then as you generate profits, take those profits and purchase additional properties. You may also consider starting with rental properties or undervalued, low priced properties before moving onto higher priced properties.
3. Set a Budget and Stick to It
One of the largest mistakes that new property investors make is to either not set a budget or to not properly establish a budget. The budget for any property investment needs to have a margin of error included, typically between 10-20% for unforeseen expenses that may arise. Also, it is important to research each item on the budget so that your budget is accurate.
For example, if you need to remodel a kitchen in order to list a property for sale, you will need to accurately assess the total costs by pricing out each item that will be replaced or refurbished. Once you start a project, you will also need to monitor the budget so that you can make adjustments accordingly if you are coming close to going above it.
4. Consider a Rental Property
While some new property investors look to flip properties or to fix them up, others begin by purchasing a property to rent. Rental properties can generate an immediate income, allowing the investor to generate a passive income over time. This income can be used for personal savings to build wealth or used to reinvest into additional properties for further wealth generation. It is important to research the rental rates in an area prior to purchasing the property and prior to establishing the rental rate. You also need to make sure you take all costs into your calculations such as rates and an allowance for repairs and maintenance.
5. Consider Foreclosures
In many economies around the world, the foreclosure market is on the rise. As home owners lose their properties, it creates opportunities for those interested in real estate investment. When purchasing foreclosures, investors can purchase the properties in any one of three stages: pre-foreclosure stage, from the mortgage lender or at auction.