Why do people invest? The answer is simple – to make money. That is why many people are turning to real estate investing. It is a good way to earn income while diversifying their investment portfolio. Of course, real estate investment is not a get rich quick scheme and takes time, knowledge, and due diligence.
Here are four tips to help you make the biggest return on investment possible with real estate investing in today’s market.
Tip 1: Create Processes and Automation
Investing in real estate is much easier if you have specific processes you follow and automate these processes as much as possible. Here are a few examples of what I mean:
- When renovating a property for rental units, use the same fixtures, paint colors, flooring, etc. This makes it easier to know the costs as well as make repairs later.
- When looking for tenants, use the same process. This will allow you to take less time and keep you within the law.
Other things to automate include:
- Rent collection
- Property management software
- Project management software
- Lead generation
- Social media
- Advertising and marketing
- Customer relations
- Comparative market analysis
Tip 2: Location, Location, Location
Before investing in a property, you need to understand the location in relation to your business plan. A good rental home will not necessarily be a good home for flipping and vice versa. However, there are somethings to consider when buying:
- Low purchase price
- High average rents
- Low taxes
- High ROI
- Area with revitalization such as an influx of trendy businesses or major employers
- Home prices on the rise
Tip 3: Think About Millennials
Millennials are the largest buying block in the United States, but many are not yet ready to purchase a home. This puts them into the rental market. However, they are not looking for apartment living. Instead, they want to find:
- Spacious rooms that have multiple uses
- Tons of storage
Rental homes are more difficult to come by than apartments. Since rentals are both hot and scarce, they make a good investment.
Tip 4: Not All Markets are Alike
It is fine to look at the overall real estate market in the United States, but understanding the U.S. market doesn’t really tell you much about your local market. This is what I mean.
The CoreLogic HPI Forecast for 2017 says that home prices will rise by 5.3 percent this year. Now let’s look at a few individual markets from the first quarter of 2017:
- Milwaukee: +3.9 percent (Greater Milwaukee Association of Realtors)
- Ridgefield, CT: -4 percent (Ridgefield Board of Realtors)
- Central Oregon (Crook, Deschutes, and Jefferson Counties): +14 percent (MLS of Central Oregon)
- Chicago: +10.4 percent (Re/Max)
What does this mean? It means that real estate is a local investment, and you will need to understand the local market. Even within cities, there are pockets that do well and those that do poorly. Be sure to understand your specific market before buying property.
As you keep these tips in mind, you’ll be able to make better investments that increase your ROI.
John Trautman is founder and CEO of the Real Estate Knowledge Institute. Learn more by visiting the website.