Not only are properties being purchased to fulfill personal accommodation needs, but also for investment purposes. Whether you are planning to buy a residential or commercial asset either for personal accommodation or earning money, considerations are almost same. However, being a buyer, you have to pay attention to estimate the earning margin after renting and selling the purchased unit. As investments are always made to increase the capital amounts, it might not always end up with profits. In order to ensure profits, it is necessary to follow few strategic steps while thinking to earn with real estate assets.
Here I am sharing few golden rules every investor should consider following before making an investment in residential and commercial real estate properties.
Pay attention to understand every aspect before you actually start searching for a suitable asset to purchase, try to get in-depth knowledge about the whole process. Read books, research on the internet not only to understand the strategies but also to estimate the suitability with your scenario. Instead of spending money to purchase courses, CDs and attending seminars about investing, consider meeting with professionals who have already experienced this activity. Their advice might better help you
Imagine the worst case scenario, it doesn't mean that you will eventually encounter with the worst situation, rather it's, necessary to ensure your own capabilities to handle the bad situation. It enables you to make a better plan with a sensible rescue strategy to protect you from total failure. The best way to calculate the suitability and risks associated with the upcoming deal, reduce the profit margin, at least, to 30% and increase expenses to 30%, if the value doesn't work on paper cancel the deal otherwise you will be in hot water.
Consider these mishaps in your mind, you might get the green signal to proceed with the deal after completing the profits and loss calculations, never ignore these misfortunes associated with real estate deals. These include repair and maintenance cost, vacant rental units and decline of asset value. These are few unexpected situations that might leave you surprised.
Ensure that you are capable to bear the total cost once you have invested a certain amount to purchase a unit, estimate the minimum amount required to run that asset. As initially, you are not generating any income from the purchased unit, it is necessary to ensure that you possess enough money to spend on its maintenance.
Save profit separately You might have been operating a residential or commercial rental; property that generates a reasonable earning. It is suggested to divide these earnings not only to pay taxes, but also to secure some amount as profit that can be consumed in case of future emergencies. If you don't save money, you will be unable to handle a worst situation. Never spend security deposit as you never know when a tenant demand for the money he is submitted to you.
Never rely on verbal communication, no matter how well you personally know a seller, when it comes to real estate purchase, ask him to arrange everything in written. This is necessary to avoid conflicts in future.
Also, keep some money to tackle emergencies; don't consume the entire amount on the purchase, no matter how profitable it is. It is necessary to ensure that you have significant cash in your account to spend on family emergencies. Also control your debts to ensure their availability at the time of need.
Take care of your customers in case you are renting your purchased unit, treat your tenants nicely. In return, they will treat you and dwelling decently. It has been observed happy tenants not only prefer staying for longer durations, but also take care of their rented property like their own.
Work with smaller units Perhaps this is the first-time you are purchasing an investment unit; avoid choosing a huge sized residential unit and commercial dwelling spreading over the huge area. First time buyers should choose a duplex, small family home or retail space to avail a real estate investment opportunity.
Never buy a property where you don't want to live, although, you are actually not going to live in the investment asset, prefer buying the house or retail space in the neighbourhood you love to stay. If you don't like the locality how could you expect others to like and stay in the same.