May 05, 2016 - 11:37
There are cycles that occur in the real estate market that dictate methods and strategies that are very useful for growing wealth through real estate ownership. The strategy of buy and hold can be a significant game changer to your income and your investment career. Although it is done buy many investors, the strategy can be tricky at times but here are a few tips to keep in mind.
(1)- Don't buy a property with very small profits (cash flow) because while it may show as profits you are riding right on the red line and any mistake or repairs the house needs could take all your small profits earned or even more. Having a case happen that way will then defeat the purpose of having a rental property. Instead you should buy properties below market price or even buy a property with minimal repairs and ADD value to it.
(2)- Don't get involved in a property with an adjustable Mortgage rate instead work with a fixed Mortgage rate. The reason is that when you rent the property, you want a clear number of the monthly fees to be able to see the potential profits you can earn. And with an adjustable Mortgage you won't be able to do that because the monthly charges will fluctuate, which can make your profits seem unpredictable in certain markets. As a smart investor you should always be able to predict, in your financial reports, around how much cash flow you will be making per month.
(1) Do as much due diligence on the rental property as possible, from the paper work to the property itself . Make sure to not over look its condition, the current market trend in the area, and inventory of the neighborhood. The reason is that when you buy and hold you don't want any surprises, especially ones that cost you money. And most importantly, for new investors you don't want to lose money on your first property and have a bad first experience when investing in real estate. Because truthfully there is loads of money to be made in long term or even short term rental properties. However, the ones that make the most profits are the ones that understand all risks, pros and cons of each of the properties.
(2)- understand what is needed to be a successful landlord. Being a landlord doesn't mean just picking up a check at the end of the month with a smile, it means understanding what your tenants need/want and provide them with the best and most absolute care for their needs to keep them satisfied. This can lead to future recommendations for you. Growing a successful buy and hold property portfolio happens only with people, meaning the more you impress and serve your tenants the more chance they could recommend you to other people in need of a home.