Think you want to invest in rental properties? Are you considering buying residential property for rentals? Experts advise people who invest in real estate for building future wealth to make a long term commitment. Here’s how:
Educate Yourself About the Industry
There are always going to be offers of great deals on properties. Some urge you to take quick or immediate action. Don’t jump in without solid preparation. Take advantage of industry resources – seminars, information sessions, and investment workshops – and talk with other more seasoned real estate investors.
Set Realistic Goals
It’s the dream of every real estate investor to find a property that produces a double-digit return on investment in the first year. You should avoid that unrealistic expectation and focus on long-term appreciation. Develop a comprehensive budget for each property purchase. Include the cost of repairs, maintenance, vacancies, taxes, real estate transactions. As you set goals and calculate your return, account for all the costs.
Slow and Steady
Avoid making multiple purchases until you have some experience. It may seem that doubling or tripling your properties will have the same effect on profits. A larger portfolio does generate more revenue, but it also can lead to greater losses when there are serious issues. Consider the wisdom of learning lessons while you are focusing on a few properties.
Balance Risk and Reward
The real test of a property’s quality – and investment potential – is realized in an economic downturn. Real estate markets go through cycles of “up and down.” Better quality locations may require higher investments and yield lower returns, but it will be easier to replace tenants. Success as a real estate investor requires patience, endurance and the ability to recover when things don’t go as planned.
Rather than succumbing to failure, give yourself another chance. Analyze the situation – what worked and what didn’t - and make the adjustments. It’s all part of working out the kinks in a long-term strategy for building wealth. Consider the option of outsourced accounting services. An accounting firm can handle your day to day bookkeeping and leave you with resources to focus on growing your business.
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