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Investing 101: Top Tips for New Real Estate Investors

In recent years, real estate has outpaced the stock market as the most popular way for younger Americans to invest their money. Driving this wave is the sense that real estate is more reliable than stocks. Today’s investors also feel the need to put their money into something concrete that can be seen and touched.

Investing in real estate is an exciting big step and a huge decision — particularly for new real estate investors. While purchasing property can yield attractive returns via an increase in value and rental income, it can also be full of potential pitfalls.

Follow these top tips for new real estate investors to reduce your risk and maximize your investment.

Don’t Make Assumptions: Do Your Homework

There are many misconceptions about investing in real estate, so be sure to find out the facts before falling into false assumptions. One of the main misconceptions is that new real estate investors have to be wealthy in order to get started. Not true! Even purchasing a modest condo or single-family home can generate immediate income if you rent it out, as well as serve as a valuable investment as property values rise in the long-term. Look at sale prices, property values, and rental rates before making any assumptions about how much you’ll need to get started.

Another common misconception is the buy-and-flip scenario. While this looks easy on television, reality is much more expensive and time-consuming. Closing costs and unexpected updates and repairs can greatly reduce the expected profit from the purchase, remodel, and sale of a rundown property. This is why many new real estate investors are opting for turnkey properties that are up-to-date and ready to rent as soon as the deal closes.

For New Real Estate Investors, Pretend You Live There

A rental property isn’t fulfilling its investment potential if it’s sitting empty. For new real estate investors who find themselves as first-time landlords, figuring out how to attract tenants can be frustrating.

One way to make sure your rental stays occupied? Take steps to increase its value. Even if you purchased your property as a turnkey, there are likely things you can do to improve or maintain it that will make current renters want to stay or easily bring in new ones.

Put a fresh coat of paint inside and out. Make sure the appliances and lighting fixtures are attractive and up-to-date. Don’t ignore the exterior amenities and landscaping. Would your rental property be somewhere you’d like to live? If not, take steps to make it so in order to turn it into hotly sought-after property on the rental market.

Consider Purchasing a Turnkey Property

Often, people end up purchasing fixer-uppers because they find the lower prices attractive. By the time you spend money getting these kinds of properties rent-ready, you’ve often missed out on any supposed savings. Cosmetic updates alone can be costly, but when bigger problems rear their ugly heads, the price of “saving” money on a fixer-upper can far exceed the cost of purchasing a turnkey property.

A turnkey property is just as it sounds — in excellent condition and ready for you to hand the keys to a renter as soon as the deal closes. In some instances, a turnkey property may already have a tenant living there when you purchase it. Either way, you save the time and money associated with renovating and searching out a renter.

All Property Management Companies Aren’t Created Equal

If you plan to rent out your investment property, unless you can spend time managing it and interacting with your tenants, it’s helpful to secure the services of a property management company. To choose the right one, look for a company with experience in managing the type of property you own. Ask for a list of references to get insight from past/current clients.

Make sure you are clear on price and what they include with their services. Also get specifics on how the company handles things such as collecting rent, handling tenant late fees, nonpayments, evictions, screening of new tenants, property repairs and maintenance. Hiring a good property management company will help things run much more smoothly, especially if you’re a first-time landlord.

With the proper research and guidance from the experts, even new real estate investors can reap nice returns on their property purchases.

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