While it can be rewarding, buying an investment property is no
small undertaking when starting out in real estate investing.
You are likely putting a lot of your hard-earned money into an
investment property, so it’s important that you know exactly what you are
getting yourself into.
To help guide you into a successful real estate investing
experience, consider the following seven items
1. Do you know what you are
Real estate investing is not the industry to dive into head-first
without having done your research. At some point you will have to give it a
whirl, likely without knowing every single thing you need to know, but you
should at least have a solid handle on what you are pursuing.
There are so many different kinds of
properties to invest in and ways of being a real estate investor that
the first step should be identifying which option fits your goals,
interests, and skill level. Once you identify an avenue of real estate
investing to pursue, you need to learn the basics of that particular method:
how to go about it, what is required to succeed in it, what are the risks, etc.
If you can’t respond to these questions, you don’t know what you are
2. What is your skill level?
This is another question worth answering honestly. This is not the
time to try to sound better or more skilled than you really are. What you have
to realize with real estate investing is that all different ways of going about
it come with different skill requirements. You can invest in a property that
requires next to no skill on your part, outside of just being able to do basic
due diligence, or you can invest in a property that requires very advanced
skills. For the latter, if you don’t have the required skill level that the
property may require, you could be setting yourself up for major trouble.
What is your personal skill level, compared to what the investment
property or strategy you are looking at requires? Again, don’t flatter
yourself; now is not the time.
3. Do you know the numbers?
You have to know the numbers. The whole point of investing in real
estate is to make a financial gain…You have to know the numbers.
If you are flipping a property, what is the After-Repair Value
(ARV) of the property? How much do you anticipate the rehab
will cost you and how certain are you of that number? How much room for
going over budget do you have before you start to lose money? What are the
financing terms and payments?
Not all numbers can be known upfront — some have to be estimated
and some are forecasted — but you should have a solid
business plan and working spreadsheets for any property you are seriously
considering. If you are unfamiliar with how to run the numbers for the
particular investment strategy you are pursuing, it’s way too soon to start
investing. Take the time to learn the numbers. Otherwise you might be tossing
money to the wind and not making money on the investment property you purchase.
You could even end up losing more than you put in.
4. Can you identify the risk
Almost as important as the numbers are the risk factors. What are
all of the ways you could lose the money you are predicting that you will earn?
The more risk factors you can identify ahead of time, the more opportunity you
have to mitigate those risks. When you are able to mitigate risk, you are more
likely to succeed in your real estate investing.
What kinds of things can contribute to risk factors?
Location (“Location, location, location”!)
Your skill level
Accuracy of pro formas/financial statements
Each of these can create challenges to the success of your
investment property. Understanding the risks and how to properly mitigate them,
will set you miles ahead.
5. Where are you buying?
Of all the risk factors, the property location is key. It’s not
just the neighborhood that matters, but also the larger market, or the
“macro-market” of where the property is located. The specific city, and in some
instances even the neighborhood, constitute the “micro-market”.
Both the macro-market and the micro-market are important when it
comes to the potential success of your investment property. For example, if you
invest in a growing market versus a declining market, you are going to be much
better off for exit strategy options. Demand is higher in a growth market which
can drive property values, make overall desirability greater, and ultimately
allow you to sell the property for top dollar. Whereas with a declining market,
you may not even be able to find someone to buy your property and even if you
do, you may not be able to get as much for it as you would like. Learn
how to find the best investment properties to buy here.
The end game with an investment always involves people, and the
more people that want your property, whether it be to buy the property as a
primary home, buy it as an investment, or even to rent it, the more profit you
6. What is your exit strategy?
What is the end game for your investment property?
If you’re flipping it, how much do you expect to flip it for?
What’s your timeframe? Who do you plan to flip it to (primary homebuyer,
another investor, etc.)? What contingencies do you have in place in case things
don’t go exactly as expected? Get answers from this step-by-step
guide to house flipping.
Knowing how you plan to get out of a property is almost as
important as knowing how to get into a property. Your exit strategy will
ultimately determine your profit. The more options for exit strategy you have
in place, the better. For flipping properties, this primarily relates to how
long you have to hold the property, which can be an issue with your financing
and hold costs–and how much you are able to sell the property for after all is
said and done. Sometimes things go totally as expected, other times they don’t.
Have plans in place!
7. Does this property fit your
What is your reason for buying an investment property and what is
your reason for buying this investment property in particular?
Different real estate investing methods and different investment
property types achieve different things. While financial gain is likely a
common goal for all investors, the means to the financial gain can vary widely.
You need to make sure those means fit your goals.
Some of those goals may include:
Short-term vs. long-term income
Active vs. passive income
Specific financial goals
Desired work levels
Desired risk levels
The more your investment property matches your goals, the more
satisfaction you will feel from it and the more likely you are to succeed with
Property Investments we focus on the purchase of Residential properties rather
than commercial property.
property is a common investment type for many real estate investors. This often
involves investors purchasing a property and recouping their investment via
rental income (and potentially through increasing equity, if the housing market
Commercial property, on the other hand, tends to be either retail premises, offices, or industrial facilities (warehousing, factories and so on). Larger commercial properties are often owned by a collective of investors, rather than a sole trader, as the initial capital needed can be very high.
It is a
simple strategy based on our expertise.
understand the residential markets and have professionals that advise us in
this area. With commercial property our experience is limited and we do not
understand all the regulations around purchasing this type of real estate.
This is why
we prefer to stay with residential property
I was talking to a friend
recently about money and what makes us happy. He explained that the thing that
brings his happiness is collecting toys. Yes, a grown man in his late 30’s
explains that he greatest joy is collecting what many throw away. He believes
that his estimated wealth from his toy collection is over half a million
for most people money is an emotive, complicated subject. We all
have different beliefs, motivations, emotions and preferences, which can make
our relationship with it difficult. Money also influences how we view
ourselves and can affect our feelings of self-esteem, control and security
For some people, other than paying for the basics, money is
merely a measurement of their personal or business success. Others see it as a
means of obtaining social status, often comparing their material wealth (house,
car, clothes) to that of their peers and friends. Their personal motivation was
very much about the outward appearance of success, even if they were not
completely fulfilled and satisfied as a result
While this means money
will make your life easier to a certain degree, if you let money own you it
will make you miserable.
True wealth is what you
are left with when they take all your money and properties away – your health,
your family and friends, your knowledge and mindset, your spirituality and your
ability to contribute to society.
True happiness comes from having a strong sense of purpose, being clear on your
ideal lifestyle, and making work and spending decisions aligned with that
vision. Life is far too short to waste time doing things you don’t enjoy.
Whether you are just starting
out with property or you are already on your way to building a portfolio,
educating yourself is the key to success. While it is possible to hire professionals
to do most of the work, without some basic understand of how the process works it’s
difficult to be successful
You don’t need to know everything but you must educate yourself
in the basics to get started. A little education goes a long way in
accomplishing four essential goals:
1. UNDERSTAND INVESTING AND REDUCE YOUR FEAR
real estate will demystify it for you, reducing your fear of the unknown.
Without that fear, you’re more likely to take the steps necessary to progress
to the next level and reach your goals.
2. KNOW THAT ORDINARY PEOPLE CAN BE SUCCESSFUL
will show you that you don’t need to have any innate real estate talent or
know-how. You will see that anyone can do this. You don’t need a degree in law,
finance or real estate, and you don’t need huge sums of cash. Ordinary people
just like you, with ordinary reserves of cash, have achieved great results in
real estate investment, and you can too!
3. CHOOSE AN AREA OF REAL ESTATE TO SPECIALIZE IN
By choosing an
area within real estate to invest in will help you to narrow down and focus.
When you understand some of the unique qualities of each type of real estate,
you’re more likely to discover the type and location that best suit your
investment style and needs. Different areas include residential, commercial, renovations
or developing, just to name a few
4. IDENTIFY EXPERTS TO ASSIST WITH YOU INVESTMENT STRATEGY
might be best for your particular kind of investment strategy. When you
assemble your team of advisors, one of them will be your real estate agent. He
or she will be an expert in one particular sector—the one you’re investing
in—but most likely won’t be an expert in other sectors. For example, he or she
might specialize in duplexes, but not malls. By sticking with one sector, you
can retain the same team of advisors without having to seek others.
Where do you get that education? A good place to
start is to read books, magazines and online articles on related topics. One
resource will lead to another, and then another, and as you find yourself
asking questions or wanting more information on a specific issue, it will guide
you to the next article or book.
Over the last several posts we have highlight some of the reasons why investing in the Japanese property market can be positive. Real estate investing like any investment vehicle comes with risks but the risks in property can be difficult to control. Things such as rent not being paid, tenants not looking after the property, items in the house breaking down and needing to be repaired and other issues that can cause landlord’s headaches. In Japanese properties, these issues are often absent.
Japanese Tenants generally stay for several years allowing a steady source of rental income.
Tenants usually are very reliable in paying their rent on time.
Tenants are respectful to rental properties making sure the properties are kept clean and tidy. On vacating properties Japanese tenants will make sure the property is left the same as when they moved in
By western standards, Japanese units/houses tend to be very basic accommodation. Tenants are required to purchase all white goods and furniture themselves. This even includes ceiling light fittings and fans
Little protection for the renter at the end of the lease period.
At the beginning of a rental period the tenant must pay on average a deposit of 2 months rent. Deposits usually are non-negotiable as they are a refundable expense that is meant to cover any damages done to the apartment outside normal wear-and-tear
Another payment a tenant must make is called ‘Key money’ and is a throwback from the end of World War 2 when the country was rebuilding. It was a gift to the owner for allowing the tenants to live in the owner’s apartment. Although building has long since be completed, the `key money’ payment still exists and usually around 2 months rent
Other fees charged to tenants include cleaning fees and renewal fees.
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