When you own a property outright, with your name on the deed, you’re faced with a large array of issues to tend to and make improvements on. And not just once in awhile! The job of a property owner/landlord requires continuous “around the clock” availability. Sure, it has a lot of perks as far as a way to make money goes, but if you’re looking to profit from real estate as an “investment vehicle” by yourself, be ready for NON-STOP ACTION!
If you don’t mind a cross-fire type lifestyle of changing circumstances, tenants, maintenance/repair obligations, “wrong turns”, and a few let-downs/kick-yourself mistakes, then read on. You’ll be dealing with the following issues and many more too!
Accurate Return/Risk Assessment – A high rate of return on a property is a good thing, but proper real estate investing involves much more than just the financial figures you see on paper. And all properties carry their share of “risk” (some more than their share), but knowing HOW MUCH RISK a property carries has to be intelligently assessed for the best outcome.
This means understanding how properties behave in relation to time, currency inflation, new technologies (USB lighting, LED lighting, modern home security, furnace/water heater technology, etc.), public opinion/behavior/crime, and more! Any experienced landlord/property owner will tell you this is true, and profiting from real estate has never been, and never will be, as simple as making a cash transaction. There’s always dynamic (changing) variables involved.
Cash Flow From The Property – Take a quick second to understand the following clearly. “Cash Flow” from a property means the amount that’s left after expenses are paid on the property itself. Expenses fall under the cost of simple management of the property. When done successfully, the opinion of all is “satisfied” with the current state of things. If the property is profitable for you, great. But if it needs upgrades, then your only “indicative marker” would be previous experience with similar upgrades, and how they affected your property ownership at the time.
Appreciation/Depreciation Of The Property – All properties either appreciate or depreciate. The level at which the value of the property goes up or down depends mostly on the following variables :
Time – Time is a variable involved with all properties, and can be a force for good or bad.
Upgrades/Repairs – If the property is well taken care of, with modern upgrades and additions, then the property will appreciate in value. If left in disrepair, then a depreciation can be expected.
Upgrades and modifications should come with your awareness of a possible good OR bad outcome. A deluxe modification can stand to hurt a properties value if the interested buyer finds removing the mods to be not worth the financial/personal hassle. On the flip side, it can also stand to greatly increase the value. It all depends on WHO’S available to buy the property at the time it’s up for sale. If they agree with the additional mods you’ve made to the property, good for you. But huge mods to a property are like playing “Russian Roulette” if they’re not done in conjunction with a buyer contractually.
Learning Curve Of Property Ownership – As with most any business, dealing with an ever-changing playing field of variables is inevitable. The learning curve that comes with property ownership can be very difficult for inexperienced beginners. Inflation changes the cost of utilities slightly each and every year, and these changes must be accounted for ACCURATELY. Many people claim that property ownership is an active/fit man’s “flight of fancy”, and not designed to be a lifetime profession, which is pretty much true.
You Decide How To Invest In Real Estate – There’s Lots Of Available Options!
Direct Investment – This type of real estate investment offers a much higher level of control, and makes you the “Captain of the Ship”. When you buy property directly, you’re free to do whatever you want with it. For example, you could decide to fix it up for a buyer with cash paid up front for the repairs/upgrades/modifications. A step-by-step process of the interested buyer paying for the upgrades/repairs as each one is done, and when they’re all completed, the house is paid for in cash and the deed changes hands.
Or, you could become the landlord of the estate, collect rent, and perform the necessary repairs/maintenance required. In most scenarios, collecting rent payments from multiple tenants in a large house setting, allows the owner to reap a much higher profit than selling the property “outright”.
Real Estate Investment Trusts (REIT) – This is a handy option for people that have money to invest, but don’t have the ability to procure, repair, or collect rent on the property themselves. These are the kind of people that don’t participate in the health of the property or rent collection efforts themselves, but still understand real estate is a smart “investment vehicle” with a high rate of return. There’s Real Estate Investment Groups, which are a similar option operating on the “no-involvement” principle.
Property Flipping / Trading – Property flipping is the fast-paced, action packed way to be a part of real estate investing. Most often, a property is purchased in a hot market, often due to financial circumstance of the owner (must sell), held on to for a few months, and then sold to the highest bidder.
People who do the best in “property flipping” are most often wealthy, and can afford to hold onto properties without bowing to time constraints. They can then sell to the highest bidder over a course of time. It’s a “waiting game” more than anything.
As a Digital Marketeer and Entrepreneur, I have been fortunate to have learnt from some of the best of the best. That is what I believe is critical to ensuring anyone’s success. Take what has worked for successful people and make owning it, knowledge first and then applying what you learn by taking action. Persevering on that path will bring about sure success, simple but effective formula.