Don’t forget to look at future value, not just current rent.
Real estate investors made up 15% of home purchases in the first quarter of 2024, which is the highest figure in recorded data according to Realtor.com. I’ve put together several expert tips for new real estate investors looking to make money, from choosing the right location, understanding financing options and maximizing returns.
Research the Location Thoroughly
The age-old mantra of ‘location, location, location’ is still relevant for investors entering the world of property investment. The best deals are in locations with data-driven indicators of growth potential. Traditional factors in a community are school ratings, crime statistics, property values and current rental rates. However, newly emerging factors include startup companies, co-working spaces and craft breweries, which can boost a neighborhood’s value.
Look to the Future
Potential zoning changes, economic development plans and infrastructure projects can reveal the direction of an area. If a community plans to add a new transit line or a major tech company, for example, this could lead to property values increasing. Focus on areas with real growth potential, up-and-coming neighborhoods where property values are on the rise.
Figure Out Your Financing Options
You need to understand your financing options — whether it’s a conventional loan, FHA or portfolio loans that cater to investors. Review your financing options to find a loan that is suitable for your current finances. A mortgage advisor who works with investment properties can help you assess your options and put together a financing plan that fits your investment goals.
Don’t Borrow Too Much
You must be strategic about how much leverage you take on because, because at the end of the day, it’s your cash flow that keeps you afloat, not just the size of your mortgage. As a first-time investor, you’ll want to write down every possible expense and plan accordingly — including a plan for expenses you forget to consider in advance.
Develop a Comprehensive Maintenance Strategy
Developing a comprehensive maintenance strategy to help prevent expensive problems is a must. Replacing old, less durable materials with more durable products during routine replacements can reduce long-term maintenance costs. Don’t assume that your home won’t require maintenance — even if it’s in perfect condition when you buy it, eventually, it will need work. Plan for this expense accordingly, because you don’t want to find yourself dipping into credit cards.