Have you ever wondered what sets the successful investor apart from the “standard” investor? Successful investors have a deeper knowledge of the market, and they take advantage of this to make their investment properties work for them.
It’s time to take a page from their book. We’ve put together a few useful things that they do that you can do today, too:
#1 They Pick the Market Properly
Real estate investors who’ve been in the business know that the market can make or break their investment. Buy in the wrong market, and you’ve got yourself a money-draining investment that you’ll likely have to sell in ten years. However, if you buy in the best market, you’ll be able to benefit from appreciation rates, rental rates, and more.
If you want to invest in real estate, look for properties in markets with potential. These are markets that have a low crime rate, are close to amenities (e.g. clinics, daycare centers, grocery stores, etc.), and are near bus stops, train stations, and so on. You’ll also be able to tell if the investment will be lucrative if there are plenty of employment opportunities.
On the other hand, you should steer clear of markets that rely solely on tourism, as you’ll have to run a vacation rental. The problem with vacation rentals is that you won’t be able to rent them out 365 days a year – you’ll have to deal with vacancies over the shoulder season, and this can impact your income.
#2 They Invest in Various Properties
Like every seasoned investor has said, your eggs shouldn’t be in a single basket. What this means is that you can’t count on one type of investment because the market will likely be unpredictable. While it’s perfectly fine to “try” investing with one property, that should be your situation for now. Over time, you should invest in other types of properties – for example, a mix of residential and commercial rental properties.
Apart from property types, you should invest in various real estate markets. This involves investing in more than one state, hence, you should also take the time to understand every real estate market.
Fortunately, if you don’t have the time to know the market, you can partner with a South Florida property management firm. They’ll be able to oversee your rental on your behalf, and this can be beneficial if you’re a long-distance landlord.
#3 They Don’t Overdo the Property Improvements
Your rental property doesn’t have to be perfect. So, unless you plan to “flip” it, there’s no need to go over the top. After all, your potential tenants likely aren’t looking for perfection – they’re looking for a property that they can pay for.
You should also remember that not all property improvements have a positive impact on the property’s value. For instance, it may be nice to build a pool, but tenants actually consider it a safety risk. Likewise, your tenants would rather have more rooms than a massive walk-in closet.
Try to compare your property with similar properties. What do they provide that your property does not have? You can “copy” these properties – for instance, what types of countertops do they have? Do they have patios, outdoor spaces, etc.?
There’s no don’t need to enter these properties to find out what your potential tenants want. You can check their listing or ask your property management agent to check the Multiple Listing Service (MLS).
#4 They Learn the Law
Property management isn’t all about managing tenants – it’s also about following the law. As a real estate investor, it is imperative to stay up-to-date on rental-related laws, otherwise, you will find yourself in court. Investors who don’t follow the law will find their reputations ruined.
One of the laws you need to understand is the Fair Housing Act (FHA). The FHA protects certain classes (e.g. race, religion, origin, etc.) against discrimination. If you discriminated against an applicant during the tenant screening stage, that applicant can file a lawsuit against you. For instance, if you did not accept their rental application due to their race, there’s no doubt that you’ll end up in deep legal trouble.
To protect yourself, find the time to understand the law and read any amendments to the law. If you don’t have the time, it would be beneficial to partner with a professional. A property management firm such as Luxury Property Care has an in-house team of expert real estate lawyers who can ensure full compliance for you.
#5 They Hire an Accountant
Tax time can be extremely complicated. That’s why seasoned investors enlist the services of an accountant who’s well-versed in current tax laws. But that’s not all – the accountant will also take care of the book-keeping tasks and make sure that the investor files their taxes on time.
Keep in mind that real estate investors file specific taxes. As an investor, you should be aware that your taxes need to be 100% correct, otherwise, the Internal Revenue Service (IRS) will need you to submit documents to support your numbers.
A real estate accountant can also help you determine the ideal property tax deductions. You’ll find that many – if not all – of your expenses can be deducted from your taxes. If you don’t claim these deductions, you won’t be able to get thousands of dollars in savings.
A Successful Investor’s Best-Kept Secret
The key to investors’ success is this one best-kept secret – they partner up with a property management agent.
Investors are aware that they won’t be able to handle the day-to-day demands of their investments down the road. That’s why they partner with a property management firm from the get-go. With a property manager by their side, they’ll be able to put their properties on autopilot and earn rental income without doing a thing!
If you want freedom from your landlord duties, partner with Luxury Property Care’s experts today. We’ll take care of it all and make sure your rental property reaches its full potential.