Becoming a successful real estate investor requires being able to find a good real estate investment deal and putting it together. Your job is not to become a realtor, lawyer, a management expert, or a repair person. Use professionals!
You should build a team to help you asses your real estate purchase in order to help you make better investment decisions. Realtors, appraisers, and banks determine what a property is worth by looking at comparable sales usually three to five sales of similar property that has recently sold in the same neighborhood. With your team you should be able to come up with approximate figures.
Working with your Realtor to go over a list of comparable sold property prices in the Peel Region (Brampton, Mississauga, Caledon) will be helpful in making a better investment.
1. What is the ideal market for investing?
There is no such thing as an ideal real estate market for investing. It tends to be more difficult to find bargains in rising markets if the market keeps rising the probability of selling the property quickly for a large profit increases. In contrast, when property values are falling more bargains become available.
You need to be able to assess the true value of properties based on when you expect to sell. Your purchase must be made at a good enough market value to allow for a profitable sale at a later date.
Leverage is very important for investors because the less cash you put down on each property the more properties you can buy. If the properties go up in value your rate of return goes up. However if the properties go down in value and you have a lot of debt on the property this can result in negative cash flow.
Since real estate is generally cyclical, negative cash flow is only a short-term problem and can be handled if you have other income or a cash reserve. This makes "0 down" investing very helpful to protect against negative cash flow for high leverage investor.
If you are a long term real estate investor, leverage will work in your favor if the markets in which you invest appreciate in the long run and your income from the properties can pay for most of your monthly debt.
3. Strategies to limit risk
To limit risk become educated in your local real estate market first by understanding the large scale trends from global down to national regional and specific neighborhoods. Learn about target neighborhoods with the help a real estate agent in your area along the way.
Real estate agents can help you interpret market indicators such as the average length of time houses have been on the market this month versus last month or last year. With this information it will help you make better investment decisions.
4. Exit strategies
It is important not to guess the future of a local real estate market you need to have a clear plan in mind when purchasing property. As a real estate investor you must know exactly how you will exit the property before you buy. And have a backup plan or two in case the first course of action doesn't work. You must know your market and your plan before you begin to invest.
Happy house hunting Peel Region (Brampton, Mississauga, Caledon)