Learning how to make money in real estate is step #1. Learning how to avoid losing money in real estate needs to be step #2.
Unfortunately, it’s a step many beginner real estate investors skip until it’s too late. It’s much easier to avoid losing money in real estate from the very beginning than it is to try to remedy the issues with a negative cash flow property.
So, how can a real estate investor avoid losing money on rental property? By adopting the best real estate investing techniques, of course. Here are 7 ways to avoid losing money in real estate.
Avoid Losing Money by Getting Real Estate Education
Real estate education doesn’t have to be a college degree or even paid courses. It can simply be you, on your own, learning all about real estate investing. Whether you subscribe to blogs, look towards books, or scour the internet for everything real estate related that you can get your hands on, just remember that experience is a huge part of real estate education.
While these things will definitely put you on the right path to avoid losing money in real estate, why not talk to other real estate investors or even a real estate agent or two? Real estate investors and agents can be the best sources of real-life knowledge about the world of real estate investing. They can share their experiences about making money and even losing money in real estate. More than likely, they will be happy to pass on some wisdom to a new-comer and gladly be a source for real estate education.
Not sure how to find other real estate investors and agents to help with your real estate education? Then this is a must-read for you: Build the Dream Real Estate Investment Network in No Time
Avoid Losing Money by Finding the Right Real Estate Markets
Buying investment property in the wrong real estate market is, unfortunately, one of the most common ways real estate investors end up losing money on rental property. Not every market is the best place to invest in real estate. There are times when even hot real estate markets aren’t a great place to buy investment property.
How is a real estate investor to know the right markets in order to avoid losing money? It comes down to two things: the right real estate investment tools (which we’ll discuss in a bit) and the right real estate market knowledge. Educating yourself on real estate doesn’t just stop with the initial tour of the books, the internet, and talking to mentors. It must continue. A successful real estate investor is one who is always looking for the new trends in the real estate market. Studying which real estate markets are up-and-coming and will provide great real estate investing opportunities is key to finding the right real estate markets to invest in.
Where can you find this kind of real estate market knowledge? Keep reading Mashvisor’s blog for up-to-date information on the best places to invest in real estate.
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Related: Where to Look for the Best Real Estate Investments for 2018
Avoid Losing Money by Knowing the Best Time to Invest in Real Estate
Investing in property is not just about the right location; there is a right time to invest in real estate as well. It all depends on real estate market trends. For instance, you have to have a good idea of whether a real estate market is a seller’s market or a buyer’s market. You, of course, want to buy investment property in a buyer’s market. There are even specific times during the year when a real estate market presents an opportune time to invest in real estate, even in a seller’s market. For example, the winter months of the year are a bit slower in the real estate marketm while during springtime demand for investment properties goes up and you’ll find higher prices and more competition.
Learn More: When is The Best Time of Year to Buy a House?
Avoid Losing Money by Analyzing Investment Properties from Every Angle
Investing in any rental property just won’t do. If you want to avoid losing money in real estate, you have to know how to analyze potential investment properties from every angle to make sure that they will be a success. This is done in two ways: investment property analysis and real estate market analysis.
Investment Property Analysis
Performing investment property analysis means looking at the investment property from every angle that could possibly be a cause of losing money in the future. The location in the real estate market, right down to the neighborhood and street, needs to be investigated. Will the location attract the right kind of tenants (depending on your rental strategy)?
Will the investment property be a positive cash flow property or a negative cash flow property? Investment property analysis is where you get the answer. Analyze the return on investment through traditional and Airbnb data and metrics like cap rate and cash on cash return, as well as the potential rental income and your investment property financing. Many times, with a thorough enough investment property analysis and a home inspection, a negative cash flow property can be spotted from a mile away. A real estate investor can then avoid such an investment property or plan on how to turn it into a positive cash flow property.
Real Estate Market Analysis
Overpaying for an investment property can be one of the worst ways of losing money in real estate. This is because it can be hard to remedy once it starts happening. If you end up with really high monthly mortgage payments, you may think to increase the rental income to match them. In this way, you might drive tenants away from your rental property and end up with a negative cash flow property.
The best way to avoid all of this? Real estate market analysis. Real estate market analysis will help you determine the true market value of the investment property. If the asking price is too high, you’ll want to avoid it. If it’s actually below market value, you can make a profit quickly if you sell soon after buying investment property.
Find Out: How to Perform a Real Estate Market Analysis
Avoid Losing Money by Using the Right Real Estate Investment Tools
Buying investment property is made so much easier with the right real estate investment tools. With the right tools, you can find the best real estate markets and easily (and thoroughly) analyze investment properties before diving into them. Essentially, real estate market analysis and investment property analysis become a breeze to perform and provide accurate results you can be confident in with real estate investment tools.
Mashvisor’s investment property calculator is one example of the best real estate investment tools. It can return real estate metrics quickly and help you avoid losing money from the get-go by choosing the best investment properties in the most profitable locations.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
Avoid Losing Money by Adapting Good Rental Property Management Techniques
Once you have acquired a good investment property and have made all the right decisions to avoid losing money, it’s now time to focus on actually making money in real estate. If you intend on keeping the investment property to rent it out, you’ll have to adopt good rental property management techniques. Finding tenants right away and keeping up a good relationship with them as well as maintaining the rental property all the while sticking to the set budget are key rental property management techniques. When rental property management lacks in any of these areas, it’s a straight path to losing money on rental property.
Want to Avoid Losing Money? Don’t Hesitate to Use Professionals!
A lot of beginner real estate investors hesitate to seek the advice and help of professionals. This is one of the biggest mistakes beginners commit. Real estate agents, real estate investors, financial advisors, lawyers, and even professional property management can all aid you in your journey of making money in real estate. When you feel the need, contact professionals and ask for help. You’ll find the money you spend on real estate professionals is worth it in the end when you’re making money, rather than losing money.
These are 7 sure-fire ways to avoid losing money in real estate. Don’t end up like one of those real estate investors who are losing money and don’t know where or whom to turn to. Make the right moves from the very start!