If you invested in real estate as a way of making money and aren’t seeing the returns you expected, there may be a few good reasons for that. As a result, it might be time to reevaluate your investment in order to determine how to fix the situation.
Location is Still a Determining Factor
It’s an age-old saying, and the truth is that location still matters when it comes to managing rental or flipping a home for resales. It’s best to select a property in an area that shows a good appreciation ratio. That, combined with the demand for rental units can ensure a strong pool of prospective tenants and buyers to choose from. Where there’s a low appreciation and/or more properties than prospective tenants, you’ll either have to lower the rent, risk maintaining a vacant property or cut your profits to make a sale.
As Than Merrill says, the location concept has become watered down when it comes to key components of a good investment. In fact, though, it’s still just as important as ever. As Merrill explains, “The reality is that without a good location the best numbers and the best data will quickly become irrelevant when buyers or renters show no interest in the property.”
Investing Your Money in the Wrong Places
There are two ways this can happen: either you pay too much for the purchase of the property, or you don’t maintain the property properly. If you pay too much for the property, your monthly mortgage payments will probably exceed what you’re able to receive in rent. If you charge too much in rent to compensate, you’ll likely have a hard time keeping tenants.
Even if you get a property at a good price, failing to keep up with preventative maintenance can also cost you. It’s important to keep up with repairs and updates to keep the home in good condition. Additionally, try to do some of the work yourself or look for a reasonable and reputable handyman. Bringing every problem to a high-priced contractor can lead to excessive costs, reducing your profits.
Seek Out Professional Advice
Finally, another big mistake is not taking the time to understand the housing market in your area. It’s important to know what rental rates are averaging in the area, so you’re not overcharging and losing out on income potential. This may mean working with a realtor, asking questions about the market, and learning as much as you can about coming trends. If you don’t take the time to learn before you invest, you may end up losing money. As Eman Hamed says, “One of the main reasons some real estate investors fail in making money in real estate is due to their lack of knowledge of the housing market and its needs.”
While investing in real estate can be a lucrative opportunity, it also requires a fair amount of hard work and research. As in all things, the success won’t come without effort. Take your time and look for the right property for you so that you can achieve the maximum benefits from your investment.