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Investments - 6 min read

Looking for a way to diversify your portfolio? Real estate investing can be tremendously beneficial to your financial well-being. But when it comes to taking the first step, many would-be investors get cold feet.

If you find yourself in this position (eager to invest but worried about making a mistake), that’s a good sign! It’s wise to be cautious when you approach a substantial investment. As you’ll see in this article, however, you can reduce your risk by approaching property investing calmly and objectively.

We’ve put together ten simple tips to help you get off to a great start.

 

1 - Prepare Your Finances

Before stretching your finances to accommodate a significant investment, take stock of your current situation. Is there anything you can do to strengthen your position? Could you consolidate debts or improve your credit score to qualify for a better mortgage interest rate? Perhaps you could start saving up for a larger deposit on the loan.

 

2 - Do Your Research

The more you know, the more successful you’ll be with real estate investing. Read books and blogs, listen to podcasts, and talk to friends who already have rental properties. Practice using real estate lingo, and read up on landlording. It sounds like a simple gig, but there’s more to it than meets the eye.

 

3 - Crunch Your Numbers

It’s true that over the long haul, real estate has historically performed well as an investment, but that doesn’t mean you should jump in haphazardly. Before you commit to purchasing a property, know what kinds of returns you’re seeking, and crunch the numbers. You’ll need to know about cap rate, net yield, and cash flow. Set your parameters before you start looking at properties, and turn down opportunities that don’t meet your numbers criteria, even if this means delaying your first purchase until you find the right deal.

 

4 - Zero in on a Location

Many first-time investors look for a property close to home. This makes a lot of sense, especially if you’ll be managing the property yourself. But don’t limit yourself to your home neighbourhood or city. When you open yourself to investment opportunities outside your local area, you can take advantage of up-and-coming markets and other advantageous deals. Wherever you decide to look, familiarise yourself with asking and selling prices, local demand for certain amenities, and other factors like proximity to public transportation and parks.

 

5 - Start Small

As you research property investing, you’ll hear all kinds of stories of people buying large residential complexes and turning a huge profit. But if you want to build a solid financial future, there’s nothing wrong with starting small. In fact, many highly successful property investors began with just a single small property. When you start small, you keep your risk manageable and learn along the way.

 

6 - Cultivate a Business Mindset

Real estate investing is a business, even if it’s a side gig for you. As such, you should adopt a business mentality and pursue the project the same way you’d approach opening a shop or starting a consulting business.

Begin with a business plan, and lay out clear, actionable goals. You’ll need key milestones, systems, and record-keeping. Always keep in mind that your goal is to generate profit. Don’t purchase the first property that catches your eye. Make sure everything checks out, just as you would with any other business.

 

7 - Start Building Your Team

Investing in real estate is not a solo project. You’ll need a team of people you work within different capacities. Real estate agents can help you to find the right property. An excellent broker can craft a loan that meets your needs. Building contractors can help you with renovations. Start getting to know professionals whose goals coincide with your own.

 

8 - Find a Mentor

As you build your team, look for a mentor as well. Finding a real estate veteran who can guide you through the process is invaluable. If you don’t personally know anyone who has real estate investing experience, talk to one of our experts at Altus. We can answer the questions that inevitably arise as you walk through the process.

 

9 - Create Solid Systems

The tasks involved with property investing happen again and again. Tenants move in and out, and furnaces need servicing. If you want to stay on top of your business, you’ll need rock-solid systems for the following:

  • Screening tenants
  • Collecting rent
  • Signing and delivering lease contracts
  • Managing maintenance
  • Marketing the property to prospective tenants

 

10 - Keep Your Eye on the Flow

Real estate investing has many benefits: tax breaks, equity growth, leverage and long-term appreciation. But ultimately, cash flow is king. In general, a property that produces 10 per cent return is “cash flowing,” and that’s what you’re after. If the numbers don’t show evidence that it will cash flow, walk on past.

Buying and running your first property investment doesn’t have to be scary, and you don’t have to feel alone. Here at Altus, we can help you every step of the way, from consolidating your current debts to finding a loan once you zero in on the perfect property. Get in touch with us to learn more.

 

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