Real estate has the reputation as the prototypical overlooked investment opportunity. However, maintaining a collection of real estate holdings in your investment portfolio is the best way to generate long-term wealth for you and your family. Stocks, bonds, and mutual funds are deservedly popular among the money-conscious, but houses, condos and apartments can prove just as valuable in the long run. Here are a few tips to help you take your real estate investment career to the next level, and some real estate mistakes to avoid.
Take Advantage of Affordable Financing
At the nadir of the housing and mortgage crisis, many people were avoiding home ownership because affordable financing was simply not available. After an excellent five years of growth, that has all changed. Even those who don’t have 20 percent to put down can find decent terms for short- and long-term mortgages. Searching around for the best financing deal can save you a bundle and can open up other lucrative investment opportunities for you and your newfound extra capital. Financing is not the only way to get into real estate, you can also save for a new house.
Learn to Love Inspections
Most real estate investors do not understand the risks inherent in purchasing a house or property. They then fail to take the proper steps to safeguard themselves and their money in the case of an emergency. The savvy investor has an acute sense of what needs to be done to make a house a functional and safe investment, and the wherewithal to trust inspectors who make it that way. Cooperating with, rather than fighting, inspection officials can change the entire way you invest.
Devise Several Exit Strategies
This is the step of the process that trips up many would-be millionaires. Real estate is a fickle business, and deals can open or close with little to no warning or explanation. Before making an investment, it is a sound strategy to plan out at least three or four different potential exit strategies so that you are not stuck holding the short straw. Identifying potential partners, or even particular groups of people that could become business partners, is extraordinarily important. Part of the difference between being an investor and a speculator is having a strategy to get out from under the investment, and the tools to get there.
Many real estate investors plateau at a certain level because they simply do not have the expertise to grow or refine their investment portfolios. Attending a seminar, reading a book, or enrolling in an educational program could be the turning point in your career, but you’ll never know unless you go. Programs like Success Path teach investors the ins and outs of industry progression based on tried and true formulas that have worked for star investors. They may require a lot of work, but this may be a great way to approach real estate with new strategies.
Remain Confident, Even in Debt
Every investor is aware of the maxim that you must spend money to make money, but good debt is not to be underestimated as a helpful tool — particularly in real estate. Confidence in the face of responsibly financed debt can turn a few measly holdings into a legitimate mini-empire, all thanks to the power of leverage. Overleveraged investments helped contribute to the financial and housing crises, but real estate moguls would not exist without responsible leveraging of personal assets.
The goal of the responsible real estate investor should be to avoid zombie real estate traps. This is where buildings are over-leveraged and under-capitalized, and a vicious cycle occurs, culminating with a decline in property values. Experienced investors can avoid this trap with self-education, caution in financing and property acquisition, and respect for the long, slow process of building a real estate portfolio.
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