HOW TO INVEST IN REAL ESTATE WITHOUT THE HEADACHE
Real estate can come with many headaches – enough to make investors wonder if it’s worth all of the baggage that comes with it. Don’t lose heart.
Real estate investing comes in all shapes and sizes, and it doesn’t have to be complicated and messy – investing in real estate without the headache IS possible.
Real estate investing doesn’t always come standard with easy, profitable deals. Investors often find themselves dealing with more than they bargained for, from finding and securing deals to finalizing the transaction process. Once you understand what your real estate investing goals are and develop a plan for how to reach those goals, however, many of the hassles and headaches fade away.
One of the easiest ways to avoid struggles with investments is to look for real estate opportunities that naturally come with fewer headaches and issues. Veloce Capital shows our clients how to invest in real estate without the headache by avoiding common pitfalls many real estate investors face.
What does the traditional real estate investing process look like?
Investing in real estate can be daunting when you look at all of the different things that you have to consider when acquiring property. You need to first understand the market you are planning to invest in. Is it stable or rising? Is it slowing down?
You also need to evaluate what you plan on doing with the property you acquire. You want to make sure that you don’t waste time looking at opportunities that won’t match your goals.
Once you have found the property you would like to invest in, you have to then go through the due diligence and transaction process which can be time consuming and exhausting.
Many investors find this process to be the worst part of investing, especially when they are first getting started.
Negotiations can make a world of difference for investors on the return on their investment. Negotiations are a common part of the transaction process and are key to make sure you are happy with the terms of the transaction.
Closing is the final step in the transaction process for many investors. This process can be burdensome and choosing the right team can greatly help you invest in real estate while minimizing the headache.
What are some of the common pitfalls with real estate investing?
Most commonly, real estate investing has the investor take on all of the risk of the investment as well as managing the day to day of the asset itself. This can lead to quite a few headaches. One of the most common pitfalls for investors with property acquisition is to under- or over value the potential properties and either pass up good deals or get themselves in over their heads with bad deals. This can lead to lost opportunities, lost money, or both.
Investors may also have concerns that their market is overinflated and feel conflicted about buying and holding properties at certain times. If the market is skewing higher than what the investor is comfortable with, it’s important they go with their gut and trust their instincts.
Another pitfall of real estate investing is in the properties themselves. Residences that are less than satisfactory can cause investors to want to pull their hair out. Rental income can be quite a draw to investors, but it’s not without its risks and challenges. Many investors find themselves with renters who don’t pay on time – or at all – or damage the property. Tenants must be vetted carefully, which can take time and trial and error.
What happens when a rental property stands vacant? It happens from time to time. Sometimes this can be as little as one to two months, and in some markets, it can go for over six months. Investors who are not prepared for vacancy periods or have leveraged everything through lending can find this to be quite difficult to get through. Cash flow issues during vacancies are commonly attributed to investors pulling out of the investing market due to poor planning.
Poor Property Management.
Unless you manage the properties yourself, you’ll need to hire a strong team to help with regular maintenance and the day-to-day business operations. Not all help is good help. Finding the right property management team can take time and energy. Some investors will find themselves with less than ideal help. This can make existing problems with the property or the tenants or create problems when there were none.
How can you avoid these pitfalls so you can invest in real estate without the headache?
Avoiding these pitfalls doesn’t have to be a headache in itself. When it comes to evaluating a property for income-producing gains, many savvy investors use the cap rate calculation to determine the property’s viability. The cap rate is calculated like this:
Net Operating Income divided by Purchase Price (real or proposed) = Cap Rate.
The cap rate can help you determine the risk vs. return ratio you will see with the property. A higher cap rate shows great potential for profit, whereas a lower cap rate will usually show a slower return with greater risk.
Keep an eye on your market and be prepared to either look outside your immediate market or to consider investments in other asset classes that may not have as much risk as real estate in an over-inflated market. Many markets in the United States are doing quite well right now, but that may not be the case where you live.
Be prepared to do your due diligence with any new potential renters or occupants for your property. This should be a fair credit check, background check, reference check, and if applicable, a meeting with the potential renter prior to entering into a contract. This will allow you to evaluate the risk associated with renting to this renter.
If you don’t feel comfortable taking on these tasks yourself, hiring a property management company that may be more versed in these dealings is a smart investment. Property management companies also have the added benefit of knowing the market and helping you stay on top of the market trends, thereby helping you to maximize your ROI.
To learn more about the basics, check out our article “6 Best Practices for Investing in Real Estate Wisely.
Cash flow issues are common with new investors. These can be easily avoided by having a reserve fund to prepare for emergencies that may arise. Having a fund for maintenance, missed rental payments, and such is also smart to have to help when the property may be vacant. Hiring a certified public accountant with experience in real estate to help maximize your tax deductions associated with your real estate investments is also a wise move so you’re not scrambling come tax time and creating even more cash flow issues.
Hiring the right people can have a huge impact on your returns and help you to invest in real estate while avoiding unnecessary headaches.
When it comes to the day to day management and maintenance on the properties, it is important to make sure you have contractors you can trust. You may find that the property manager is creating issues where there shouldn’t be any, such as not depositing funds in a timely manner or not taking care of preventative maintenance. This can cause larger issues that cost more to get fixed.
Keep a large network of contacts that can refer you to reliable contractors. Also keep up with what is going on so you’re not surprised down the road if an issue arises. It’s just as important to do your due diligence before hiring a property management company or contractor as you would a tenant. Most property managers will come with references that you can verify their experience, and the same can be true for most companies that you may need to call for maintenance or emergencies with the property.
How We Can Help
Veloce Capital is here to help real estate investors keep their heads free from stress and headaches that come with investing. We offer a hands-on experience which is ideal for investors who want to invest without the hassles and headaches of day to day operations.
Our goal is to help our clients maximize their return with as few headaches as possible.
We help our clients find the best deals for them, their situation, and their portfolios. Our clients come to us to avoid the common pitfalls and headaches that are prevalent with real estate investing, and we help them invest in real estate without the headache.
At Veloce Capital, our main focus is helping our clients by using our experience with high-yield investment opportunities. We purchase, lend, and/or partner on a wide variety of real estate projects. We offer personalized service to ensure that every client’s needs by:
Involvement with all aspects of the client’s investment process so that they are well taken care of without the hassle and stress that comes with investing in real estate.
Looking to preserve the principal of our clients’ investments.
Seeking collateral-backed or secured debt investments, which provides additional protection for clients.
Our wide range of partners, lenders, and staff allows us to keep our finger on the pulse of different trends in the market. Clients have access to us 24/7 to assist with any questions or concerns they may have. Finding the best deals in your market (or outside markets) can be a hassle.
We not only help find those deals, but we assist with converting IRAs to self-directed, due diligence, negotiations, SDIRAs, and closings. We help clients avoid the hassles and stress of dealing with the transaction with our knowledge and expertise in real estate investing and the ever-changing markets.
Real estate investing doesn’t have to be filled with headaches. While there are common issues that can come up, with proper planning and due diligence these issues should not have a major effect on your sanity. The majority of your headaches can be solved by planning and being smart upfront.
If you are concerned with the risks, it’s important to keep your risk level within your tolerance zone so you’re not stressing out over your investments to where they are more of a burden than a clear step towards your goals.
To learn more about how Veloce Capital can help you invest in real estate without the headache, please email us at email@example.com