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Real estate investing, when done right, can be a lucrative source of profit and can offer lifelong financial freedom. However, failure to consider and understand the nuances of owning and running a rental investment property before acquiring it can ruin your chance of success. Where you purchase a rental property sets the precedence for your return on investment (ROI). One area that's been in the spotlight in recent years is Rochester, NY, for example. It's well-known for its steadily increasing economy and high employment rates, aspects that attract professionals. It also has a variety of amenities that attract tenants of different demographics. Pitfalls to Avoid To run a successful investment in this (or any other) area, you need to know the many pitfalls to avoid. Not Including all costs The costs of acquiring and running a rental property differ immensely from the costs of financing a private home. Mortgages, loan repayments, and down payments are obvious costs, but in addition, you need to consider the following: maintenance fees, property management costs, insurance fees, property taxes, legal fees, general upkeep, and replacing home appliances if necessary. Not Doing Researchs Your excitement for a new business venture should not cause you to be tempted to neglect your research. Just like other important purchases, like home appliances or vehicles, when it comes to real estate investing, you should be very diligent in finding out every detail before making a decision. Failure to Seek Professional Advice It takes a team of professionals to close the deal and oversee the operation of your rental property. As a homeowner, you might think you have the knowledge, however, when it comes to real estate investing, it pays to be guided by experts. You will need rental managers, inspectors, an insurance representative, and a good attorney, to name a few. Their knowledge and advice will help you make the right decisions. Lack of Long-term strategy Navigating anything without goals can have dire consequences, and it is no different with real estate. Clearly define your goals and outline a plan for how you intend to achieve them, because with a robust plan of action you will avoid impulsive decisions. Consider your strategy by examining factors like the type of property you’re after, whether you want to “hold” or “flip” it, and anything else that will affect how you will maximize your returns and reach your goals. Overpaying Experts in real estate investing note that when the market is competitive, the majority of first-time buyers tend to pay a price higher than the asking price. This can be a pitfall that results in a hefty financial loss. Overbidding can create unnecessary debt; you may even have to compromise on other costs, such as an emergency fund for dealing with unexpected management costs. Thorough research and sticking to your budget can help you avoid this. Not Thinking About the Tenants You should have your ideal tenant in mind when researching your rental property. Amateurs in real estate investing overlook the needs of tenants, and this can result in properties no one wants to rent. Working with a property manager right from the start can help you overcome this. Ignoring demographics such as age, income, and education can be detrimental to your success, while neighbourhoods vary in amenities, cultural attractions, local shops, events, and good schools, for instance. Choosing the Right Location You need to invest in an area where there is job growth, opportunities for high-paying jobs, and amenities like quality schools, proximity to the beach, and other local attractions. As our example, Rochester, NY is known for its steadily increasing economy, with different neighborhoods suitable for tenants of various demographics. This makes it an ideal location for real estate investing. It requires the right strategy and a team of experienced professionals well conversant in the local market to avoid mistakes that could result in financial losses. So if you’re looking to buy a rental property, working with a professional property management company is vital to maximizing your ROI. Author Plate Danny Torres is from Torres Turn Key, a property management company in Rochester NY with more than ten years’ experience dealing with both domestic and international clients for real estate investing. Providing a holistic service for both commercial and residential properties, the company brings together a host of experience and specialist knowledge to build long-term relationships and create maximum value and benefit for their customers.
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