Finding profitable property investments despite changing trends.
Purchasing real estate as an investment property might sound like a daunting task. But compared to all the investment options within your portfolio, real estate can yield some of the greatest profits.
Most often, the horror stories can be avoided. Many people are unaware of how a reputable property manager can shield them from chasing down rent payments, emergency calls, and home maintenance repairs. Typically, the costs of hiring a property manager are minimal when weighing the value in stress relief, call volume, and risk management. Ryan Bohl, a local CPA and real estate investor, knows how valuable finding the right help can be.
“A real estate agent knows the market and can help you make sure you are getting a good deal and buying the right property,” he says. “A property management company can help you find good tenants, reduce vacancy, ensure you are charging the right rental rates, and reduce some of the management headaches that can come along with rental property. I have found that in the long term, you actually make more money by utilizing these professionals.”
Another major tip from savvy investors is to do a thorough pre-purchase inspection to help avoid major surprises. You can assess if any big-ticket items are at the end of their life expectancy and what needs to be budgeted. That enables an investor to properly allocate profits and reserves. Greg A. Hoffmeyer, the owner of Accord Mortgage and a seasoned investor in his own right, says it can be worth it.
“Just do it. Every investment is scary, and you never know if you’ll make money, but real estate investments have been the strongest performing assets in my portfolio.
”The key is to evaluate personal finances and ensure you’re prepared to make an appropriate down payment and have reserves to ensure success in every investment.
Often, the profit margin is slim early in an investment, and it’s imperative that the big picture is taken into account. Greg also says his biggest piece of advice is to buy right.
“If you’re flipping or holding a long-term rental, this is solid advice,” he says. “Try not to overpay because it doesn’t allow room for mistakes in budgeting for repairs or upgrades. And there are always unknowns when you tear into a home.”
Unless an investor has acquired properties with all cash up front, it can seem like a long game to financial freedom. However, not all investors are cash buyers, and many of the most successful investors will tell you that they started small and leveraged properties over time to increase their portfolio. Over time, paying off the mortgage is when the profit will begin to greatly exceed even well performing stocks.
“Just do it. Every investment is scary, and you never know if you’ll make money, but real estate investments have been the strongest performing assets in my portfolio.”—Greg A. Hoffmeyer, Accord Mortgage
“Put as much sweat equity into your rental properties as you possibly can during those early years and leave any and all cash flow that you generate in your rental account,” says Scott Schaeperkoetter, owner of Signature Homes and real estate investor. “If you can pay additional principal each month with that cash flow, do so religiously.”
A unique benefit to investing in real estate versus stocks and bonds is that this kind of investment offers monthly profits along with profit at time of sale. Realestate has long been viewed as one of the most stable investments one can make. Investing offers so many levels of financial freedom. Investors benefit with monthly cash flow and then ultimately leave their portfolio to heirs or sell the properties and liquidate assets. If you’re concerned about the potential volatility of real estate values, know that values can fluctuate in the short term. But the long-range direction of real estate values have always been a steady climb upward over the long-term.
If you are curious about building an investment portfolio, connect with a professional real estate agent and begin the conversation. Remember, success is not built overnight, and everyone starts somewhere. Don’t dismiss the dream, even with a modest budget and starting point. If you do it right, your future self will thank you.
• Start early.
• Choose your market: buying, renting, or flipping.
• Diversify your portfolio.
• Invest in areas with stable market values.
• Keep the budget in check.
• Work with professionals.
• Use the 1% rule: Monthly profits must be equal to or no less than 1% of the purchase price.
• Budget for periods of vacancy.
• Consider using an LLC. Be aware it can limit financing options.
• Look for profitable features, not the features you like for your personal home.