GREAT REAL ESTATE DEVELOPMENT ADVICE
It’s been proven time and time again that real estate investing is the best way to increase your wealth. That being said, wealthy real estate investors will tell you there are three secrets to success in real estate: location, location and location.
Finding the right location is easier said than done. At True North, we specialize in offering expert consulting for people looking to purchase and/or develop commercial real estate as an investment opportunity. We are investment property specialists who help new and savvy investors that need guidance on how to maximize value while minimizing risk with real estate investments. Here are some critical tips to assure the best chances of success in scoping out a piece of land and how to determine whether it’s a worthwhile investment.
1. KNOW THE RIGHT LOCATIONS
Ideally, buy in growing areas and with lower supply of land or properties. Choose an area where people like to live. For example, which areas have special appeal, good transportation options and good schools? Avoid areas with notoriously poor rental histories. It’s always better to buy the worst property in the best location, than to buy the best property in the worst location. If you are unsure of the location of a potential investment, spend some time investigating. We can certainly help you out with this.
2. HAVE MONEY LINED UP
One of the most important attributes of successful real estate investors is the ability to act quickly and decisively, when the perfect opportunity presents itself. Having the equity and financing (capital) lined up to pounce on the right deal, is key for success. It is also critical to have at least six months of mortgage payments saved up, prior to buying the first investment property. Even in the most ideal location, it will take some time to find the right tenant. In addition, having money within reach makes dealing with inevitable unforeseen conditions easier.
3. KNOW YOUR GOAL
Define why you want to buy investment property. Is it for an extra income stream? Are you seeking a capital gain from a “flip”? Is it to eventually quit your job and make your living from investment properties? Your reason for buying an investment property will influence your choices along the way. Knowing your reasons will help you stay focused.
4. DO THE MATH
Before you begin looking at properties, sit down and work out the cost of properties you are looking at and the rent you are likely to secure. Once you have the mortgage rate, proposed capital improvements budgeted, and probable rent sorted out, be thorough in deciding whether your investment will work out. What will happen if the property sits empty for a couple of months? Do you have any budget allotted for the carrying costs (interest, realty taxes, utilities, etc.) of time required for permitting, construction, tenant fixturing, as it all adds up?
5. RESEARCH THE MARKET
If you are new to real estate investing, what do you know about the market? Do you know the risks as well as the opportunities? Make sure that you check property documents thoroughly before investing in property. Get planning information from the local/municipal Government Authority. Fully educate yourself by talking to other people who own properties. Read books on the subject. Attend local real estate investment clubs, etc. Keep checking our website. The better you educate yourself, the higher the chances you will take the proper steps to reduce your risks and make smart and safe investment decisions.
6. KNOW THE PROPERTY
If you are new to real estate investing, what do you know about the property? Have you conducted proper due diligence, including legal, physical condition assessment, environmental, entitlements, etc? Did you have budget estimates from reputable advisors? The better you surround yourself with specialist advisors, the better educated you will be, resulting with the higher the chances you will take the proper steps to reduce your risks and make smart and safe investment decisions.
7. KNOW THE PITFALLS
Real estate can be high risk—there are many things that can go very wrong. Real estate is capital intensive. You can make large sums of money, but you can also lose the same. If it sounds too good to be true, be very careful. Once you take ownership of the property, you have have a plan to correct the problems and issues, or live with them. Update your knowledge about the real estate, capital and construction markets trends. Before you make any investment, you should always investigate the negative aspects as well as the positive.
8. CONSIDER HOW HANDS-ON YOU WANT TO BE
Buying a property is just the first step. Will you rent it out yourself or get an agent to do so? Agents will charge you a management fee, but will deal with many problems. Some agents have a good network of plumbers, electricians and other contractors to contact if things go wrong. You can make more money by renting the property out yourself, but be prepared to give up weekends and evenings on viewings, advertising and repairs.
9. CONSIDER LOOKING FURTHER AFIELD
Your town may not be the best investment. Do not be sentimental, as capital flow has no boundaries. The advantage of a nearby property is being able to keep an eye on it, but if you will be employing an asset manager anyway make certain they have the skills experience and resources to properly represent your interests. Cast your net wider and look at growing communities with good commuting links that are popular with families, or that have diversified industry or a sizeable university.
10. BE CONSERVATIVE WITH YOUR EXPECTATIONS
Always overestimate the amount it will cost to renovate a property, overestimate the time it will take to complete, underestimate the rental income you will earn, and overestimate the expenses you will have to pay.
11. USE A MENTOR
Having a True North advisor is the fastest and most efficient way to become skilled at real estate investing in your chosen area. We have our finger on the pulse of both income producing commercial real estate and commercial development opportunities. We have the wisdom, connections, insight and talent to direct investors to the most advantageous investment real estate situations, weighing risk against reward. Because of our knowledge in both the investment realm as well as the “brick and mortar” aspects of commercial construction, we’ve helped many clients both invest in income producing properties and achieve great success in real estate development opportunities.
Investment properties can be a terrific way to expand your portfolio, but they can also be disastrous. Knowing the market, your own risk tolerance, and the level of work required is essential to succeeding as a real estate investor. If you are in need of experienced help in real estate investing and interested in working with a reliable company to help you put your money into something worthwhile, let a True North Real Estate Asset Manager show you the ropes.
Contact Us today to find out how we can help.