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Basic Rookie Advice For New Property Investors
Without going in the details that a new investor might not be ready for, here are some general tips that can give newbies a perspective of the buying process. They are the very fundamentals, but experienced players can sometimes forget about them due to forgetfulness or simple overconfidence.
Start contemplating the sale of the property before you even buy
You must already have a prospect in mind when considering the purchase of a home. It would either be the potential tenants or a prospective buyer. You need to see things in their perspective so that you can get a feel of what they would find desirable and what would be a turn-off. If you fail to understand who your customers are, you will not be able to fully exploit the asset you have in your hands. That is business 101 and it applies to real estate as well.
Acknowledge that emotions can cloud your judgement
People might not feel a lot about buying groceries at the supermarket. But their emotions will play a huge role when buying a house. Even if you have identified a lousy deal, you might still feel like closing if it somehow resembles your dream home. Know your number and commit to your investment goals. The more information and market data you have, the easier it will be for you to avoid an emotional mistake. You will of course, need information that you can understand.
Everything is always negotiable
If a seller is hard-willed and will not compromise on asking price or terms of transaction, it only means that you have not offered something in return to soften him up. You need to learn how to discover hidden needs and wants a seller might or might not reveal. Even so, lowballing is not always the protocol to follow. Sometimes the best way forward for a deal is to start with an offer a seller cannot refuse.
Amenities and infrastructure
Commuting is always a factor directly affecting occupants of a home. People need to travel for work, food, entertainment, etc. A badly located house will cost the inhabitants time and money in the long and short term. And let’s not forget how these shortcomings can negatively affect the mental state of occupants. Surely you don’t want your tenants to be cursing and swear at themselves for living in such a bad location whenever they leave home for work or just the movies.
Never live on the financial edge
If you are thinking about using rental cash flow to fund the mortgage and cannot even withstand 6 months without any rental income, you must seriously reconsider your investment strategy. Living on the edge means that you can fall over at anytime. You need to build a cash buffer for your investment. Not only can a significant cash pile potentially save your assets, it also provides you a better mental state to go about your investment activities.
Stay away from investments that you cannot directly oversee
There is nothing wrong with owning a rental property halfway across the country as long as you are able to oversee it’s operations at will. You can leave it to the property management company. But you need to have a partner of some sort to look after it. You can never know what is going on with your investments. Property manager might be complacent when there is no one to push them. In extreme cases, vacancies might be reported while it is actually tenanted. How can you verify them when your asset is too far for you to take a look at? Stay away from these types of deals when you are a beginner.