If you want to be a successful real estate investor start young and stay the course. Worcester County continues to offer many amazing real estate opportunities!
When choosing what property to buy, an investor needs to do his or her homework on comparable area properties. You need to know the rental and vacancy rates of nearby properties. For example, if nearby similar properties rent for $700 a month and are largely vacant, an investor should know that he or she will need to set rent at a lower amount in order to attract tenants.
New construction and renovation projects in the area are also a factor to consider. New and renovated buildings may create a glut of rental properties available on the market. This could create a larger supply of housing which means lower rental income for you. Fortunately, the Central Mass rental housing market is very stable.
Several investors I work with own properties in Worcester, Spencer, and Ware and are having excellent results. Noticeably so, housing does not appreciate as much when you move further west from Worcester but your ROI is just as good. Remember, even though you collect less in rent you are purchasing the property at a lower price.
DO I NEED A PROPERTY MANAGER?
Hiring a property manager isn’t a decision you can take lightly, so explore the pros and cons of hiring a property manager to decide what’s right for you. They are not necessary but a good manager can certainly make life easier for an investor.
Our managers know the tenants and owners on personal level. A manager should have a good working relationship with you and your tenants. It’s a sure recipe for success. An eviction is not in anybody’s best interests.
I personally know investors who rarely do any of the property maintenance themselves. It all starts with purchasing your property at the correct price. One of my younger investors, who now owns eight houses, had this to say. “You need to make sure you are making a decent ROI, if you are, you’re halfway there. You should also have a good broker with adequate connections in finance and repair services who can guide you through the process.”
REVENUE
Your number one priority is keeping your building rented and that means you have to keep it updated and in good condition. There is a limited number of renters and you want to make sure that you get the best candidate. Maximizing your rental income means you need to have a property that is better or equal to your competition.
The location of your building will also have a direct impact on how much revenue your real estate can generate. So choose wisely. A good realtor who knows the rental market can easily advise you on current rental vacancy rates and the amount of money your property can earn.
RECORD KEEPING
One of the mistakes young investors make is not keeping accurate records of expenses and knowing what they are making on their property. It’s important to know what your return is. If you are not making money you need to figure out why that is happening. Ignoring those details will cost you.
In most cases, virtually every expense of buying and maintaining a rental property is tax deductible. You cannot beat the tax benefits when you own a rental property.
IMPROVEMENTS
Make consistent and smart property improvements. When I was a young investor I made some poor choices with some of my property improvements that were not necessary. Give some thought to your upgrades. When a tenant moves out and you clean the apartment, consider going one step further and do a bit of renovation. It’s always in your best interest to do repairs as soon as possible. In fact, putting off some repairs could be against the law.
LONG TERM WEALTH BUILDING
Trust me, investing in real estate is a great way to build long term wealth. I have several young investors now in their late 30’s who own 7-8 homes each and have well over 3 million dollars in real estate. Those experiences can be yours but you need to surround yourself with successful entrepreneurs who can guide you through the process.
Understanding the factors that affect market rents is very important. In fact, it could be the most important fundamental to understand.
The beauty of rental residential real estate is there will always be a demand for it. I would go as far as saying it is a very low risk investment IF you have the right people in your corner. That said, I have seen my share of investors lose big because they were working with agents that did not understand or care about the goals of their clients.
FINAL ADVICE
Work with people who understand the process.
Start investing young and stay the course for the long term and you’ll be happy you did. When others are worried about their retirement accounts you’ll be secure knowing that you own something real and tangible that continues to provide you with cash long after you retire.
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