As Warren Buffett stated, "Never depend on a single income. Make investment a second source." Mr. Buffett did not make his fortune overnight, however he did commit to hardcore research and determined to be successful.
The prospect of real estate investing is not solely relegated to the wealthy. In fact, it is open to anyone willing to make a commitment to a new business venture. The selection process for obtaining profitable rental properties is well within grasp when avoiding three specific mistakes:
More specifically, don't purchase a fixer-upper unless you know how to fix it up without draining your bank account. While HGTV makes such projects look infinitely simpler than is realistic, these properties require a great deal of time, effort and finances, often resulting in buyers getting much more than what they bargained for. Literally! These risks and costs all come out of your pocket, thus depleting your ROI. Unless you are a licensed professional contractor, you will likely struggle to keep your head above water.
Almost anything can be changed on the interior or exterior of a property. Landscaping is no exception. However, you will never be powerful enough to change the neighborhood. When it comes to real estate, one principle always stands true: location, location, location. Buying in a low income neighborhood, for example, will yield low income tenants and your home is likely to remain empty for a longer period of time while you search for a credible renter. Most applicants don't want to live near railroad tracks while trying to sleep through airplanes flying overhead. Consider the desirability of zip codes before purchasing as well as local amenities: freeway access, close to good schools, walkable, low crime, etc. Search for a town that has a low inventory of rental properties, yet a high demand for them. While this strategy might require a larger investment up front, it will be worth your while in the long run and will be a much more stable, successful business venture.
It is exciting to find a home that has the potential to become your next rental purchase. Don't allow enthusiasm to trump common sense. Pay attention to every minute detail and note the condition of the foundation, quality of windows, search for any water or structural damage and the location of tree roots in proximity of the house. Take the time to hire an experienced structural engineer and inspector to further determine the quality of the property you are thinking of purchasing. Don't take shortcuts and take your time. There is a common misconception that you have to act fast so as not to lose out on a property. However, NO deal is far better than a BAD deal. Don't be afraid to let something go in order to reduce risk. Instead, search for a property whose flaws are predominately cosmetic and easy to fix. Homes with big ticket repairs are best avoided in order to strengthen your potential ROI.
Don't make your decision in haste, but don't give up altogether out of frustration. Do the research, take your time and build your savings in the process. You will ensure greater success in exercising such basic principles.
Related: "7 Reasons for Rentals"