Learn from the Experts Before Investing in Property
Forewarned is forearmed as the old saying goes.
16:29 16 May 2017
One can never enter in to the world of property investment with too much knowledge. Below are some of the most important words of advice gleaned from experts who have been through the thick and thin of real estate investment.
It’s Not Only About Money
Real estate investment is about more than just buying and selling, and requires more than money alone. When launching your first investment, be prepared to invest significant amounts of time as well as money. Most investors begin with what is known as house flipping; buying a property, renovating it and selling it on within a year. Before you commit to such a venture financially, ask yourself if you have the necessary skills to renovate a property yourself and be realistic about what you can do on your own and the areas where you will require outside help. If you need to spend money hiring a contractor, your first property should not be too labor intensive in this regard.
Start with a Clean Slate
If you are already in significant debt, don’t subject yourself to the stress and uncertainty of making an investment when you cannot be certain of what return to expect. If you have more manageable debts, then you should aim to pay these off before putting more money in to any investments. This not only makes good financial sense, it will also relieve a huge amount of financial pressure from you.
Choose an Easy Starting Property
The first mistake many investors make is buying a property in disrepair because it is a bargain. They then discover that fixing up the house to the standard necessary to resell it eats in to most or all of their profits. Unless you know a skilled contractor who can guarantee you a very good price on the work, or you already have significant experience in home improvement yourself, your first property should be one that requires only minor repairs.
Plan Ahead
Before you even purchase your first property, you should have a good idea of what you intend to do next. In particular, you should familiarize yourself with section 1031 of the US tax code. Section 1031 allows you to invest the gains of the sale of an investment, in this case property, in to a similar investment without paying any capital gains tax. For a first time investor having a suitable 1031 exchange property lined up to invest in immediately after your first sale will allow you to continue to build your portfolio without losing a significant portion of your investment to tax.
Investing in your first property should be enjoyable above all else and the better your planning beforehand, the less you will have to learn and worry about as you go, and the more enjoyable it will be. Some learning will only come from experience and it’s fine to not know things until you discover them on the way, but you should still aim to do as much upfront as possible.