You can easily improve the value of a property by doing a bit of rehab. Otherwise known as value-add. You don't have to have a construction background or pay tens of thousands of dollars to add significant value to a property.
For example, replacing your roof costs around $3,000 and you can buy new granite countertops for $30/sqft.
With these two cheap upgrades, you can substantially increase the value of your property right off the bat.
8. Don't invest in a REIT
Investing in a REIT is like investing in a stock. When you invest in a REIT, you're giving a property investment fund money to buy properties on your behalf.
Investing in REITs used to be a very safe bet. In light of of the recent pandemic, our advice is to stay away from REITs for the foreseeable future.
REITs are mostly focused on commercial properties which have been significantly more affected by COVID-19 than residential properties.
The pandemic & social distancing will take a toll on all commercial assets in different ways:
Multi-family - People will want to maintain a greater distance from each other even after lockdown orders are relaxed.
Office - Companies are finally starting to realize how easy and convenient it is to work from home because tools like Slack and Zoom exist. This will prevent them from wanting to spend a bulk of their funding on rent.
Retail - For obvious reasons.
Also, when you invest in a REIT, you're not actually learning anything about real estate investing.
The best way to get started is to apply these tips and just dive in.
9. Generate referrals
Savvy investors generate a large portion of their business through referrals. Because of this, it's important that you build your network and treat other investors with respect.
This includes any business partners, clients, tenants, and anyone with whom you've had a relationship with in the past.
Real estate investing groups are prevalent, and burning one bridge may potentially lead to many more burned bridges.
The best real estate investors pay extremely attention to detail. They're also typically very open to feedback including complaints and concerns, and represent their business in a positive manner.
This allows investors to build the kind of reputation that makes other investors interested in working with them in the future and referring their friends as well.
10. Know the rules and regulations
There are plenty of regulations that investors uncover after being in the business for a while.
For example, you may be considering turning a basement into a second rental unit. Little do you know that's illegal in the state you own your property in.
You want to pay attention to zoning laws, as they tend to differ in each local market. For example, you want to think twice about converting the first floor of a building you buy into a co-working space because local zoning laws may prohibit it.
You never want to assume you can add another room or second story to a building. Always verify first.
Even if you're able to obtain a permit, you want to understand the degree of work required to get a permit before you start the process.
11. Create a network
Building a solid network of other real estate investors can provide important support and create opportunities for both new and experienced real estate investors.
You want to focus on making friends with more experienced investors that have been through the wringer, and even consider finding a mentor.
Because much of real estate investing relies on experiential learning, experienced real estate investors understand the importance of building a network and most wish they'd started much earlier.
12. Get an accountant
Talk to any experienced investor, and they'll tell you that taxes comprise a significant portion of their yearly expenses.
Besides being expensive, if you file your taxes incorrectly or miss out on a payment you were supposed to make, the expenses will be significantly higher.
Understanding the current tax laws can be very complicated and take time away from the business at hand. This is especially true for investors buying properties in multiple states, as the tax laws can be drastically different on a per-state basis.
Savvy real estate investors will almost always retain the services of a qualified, reputable accountant to handle their books.
The costs associated with retaining an accountant are often negligible when compared to the savings they will bring to your business.