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Real estate is a complicated industry that takes years of hard work to master. So, for many new and would-be investors it can be intimidating to dive in and get started.
If you are a new real estate investor looking to learn what you should do in order to put your best foot forward and prepare for the future, you are in the right place. So, in order to help you build your real estate business and achieve the long-term financial freedom you have been looking for, here are three tips you should follow.
However, before we dive into our primary real estate business tips, if you are interested in learning how to get the ideal financing for all aspects of your real estate business, click the link below for a free strategy call today.
Set Realistic Expectations For Your Real Estate Business
In the real estate business, you have to keep things realistic. If you are looking to buy rental properties and expect to become a multi-millionaire overnight, you are getting carried away. While the dream of living your life financially free off the passive income generated by your investments is certainly attainable, it can take a long time to reach it.
Consider the Cost of Living
Consider the following, in Canada the average monthly cost of living is estimated to be $2611. Meanwhile the average single-family home is estimated to generate between $200 and $300 in cash flow. So, in order for your investments to cover the average person’s monthly living expenses, you would need to own between 9 and 13 cash flowing properties. However, you likely are not hoping to live an average lifestyle, you are going to want even more which means either buying more property or working another job on top of your investments.
Despite this, the real estate business and the income you can earn each month through cash flow alone is still incredibly valuable and allows you to live a much freer and more open lifestyle. So, do not let the steep curve to living entirely on passive income discourage you from trying your hand at real estate. Instead, try setting more reasonable short-term goals to help you on your journey.
Set Manageable Goals in the Real Estate Business
For example, each year take inventory of the properties you currently own and the profits they are generating for you. Then, based on those numbers try to set a goal for a specific number of new purchases and deals to complete during the year. This way you have a reliable guideline to follow when deciding how to invest and you can more accurately track your progress towards the financial freedom you have been looking for.
Overestimate Your Costs
As a new investor entering the real estate business, one of the worst things, you can do for yourself is underestimate the funds you need in order to get started. Whether you are calculating a down payment, setting money aside for closing costs, or saving to complete renovations and updates on a new investment property, you want to be absolutely certain that you have saved enough money to make the deal work.
Buying a home is frequently much more complicated than they look on paper. After all, you are not strictly paying a down payment or reading the price off of an MLS (Multiple Listing Service) listing. During the purchase process you may incur additional costs that need to be accounted for.
For example, it is typically advised that you save a minimum of 1.5 per cent for closing costs. However, sometimes those costs can exceed the recommended minimum. So, if you chose to save 3 per cent instead of 1.5 per cent, you can easily be ready in the event that closing costs do end up being more than you expected. Additionally, if the costs do not end up exceeding expectations you will be left with more money to furnish, renovate, or market your new investment property.
Similarly, if you are buying a property that needs some work prior to offering it as a rental, you should always budget more than you need to complete the renovations. Sometimes small jobs such as replacing a faucet can reveal larger underlying issues such as severe water damage and mold. These unplanned expenses cannot go ignored and frequently come with hefty price tags that can seriously cut into your personal expenses if you do not plan accordingly. Yet, if you anticipate spending more on renovations than you would typically spend, these surprise problems and repairs can be a breeze.
Discover Residential Property Management With This Step By Step Guide
Protect Yourself and Your Assets
Finally, one the most important things you should do as a real estate investor is ensure that you have all of the appropriate protections for both you and your assets. This way you can ensure long-term success early on, and do not run the risk of allowing one mistake cost you your entire portfolio.
Get Proper Insurance
One of the most important things you can do in order to protect yourself and your investments is to get the appropriate insurance for all of your properties. This can include homeowner’s insurance, liability insurance, landlord insurance and other specialty insurance programs that can cover you in the event of a sudden emergency.
Your insurance may also protect your tenants from things such as house fires or flooding that may destroy or damage their private property. It is also recommended that you convince your tenants to get renters insurance to further protect themselves and their property.
Know Your Local Property Laws
Another key element in protecting yourself and your investments is building a firm understanding of your local property laws. This way you can be confident knowing that all of your investments are legal and responsibly managed. Otherwise, you may need to face hefty fines and expensive lawsuits further down the line.
As well, you should make sure you know which renovations and repairs require specific permits and permission. In Ontario, the fine for building without a permit can be up to $50,000 for a first offense. For subsequent offences that price skyrockets to up to $100,000.
Bonus: Get the Best Financing Available For Your Real Estate Business
Finally, one of the most important things you should do as a real estate investor is to make sure you are getting the best mortgage financing for your properties. Fortunately, at LendCity we work with a wide network of some of the top lenders in order to help you find the best rate available for your purchase.
So, if you are ready to begin investing, give us a call at 519-960-0370 or visit us online at LendCity.ca. Our team is also available to help answer any questions you may have about the world of real estate investing. Alternatively, click the link below to book a free strategy call today.