Real Estate Investing-Know Your Limitations
When investing in real estate it is easy to become overwhelmed. Usually, this is because an investor may have too many properties or projects that he/she is trying to work on at one time. Let me explain, the above statement is true but it is not really the root of the problem. The real problem exists because (1) an investor has more properties or investment projects then he/she can financially handle at one time and/or (2) the locations of the properties or investment projects are so wide spread apart that it becomes difficult to maintain them all at once.
My suggestion is that you mainly purchase and work on multi-unit property, such as 2 or 3 flats. If you really want to go big and can handle it, then I suggest purchasing or working on a multi-unit apartment building. My reasoning for this is simple; with multi-units you can personally manage several units from one location. If you are renting out property for income you can manage each apartment and collect all rent from one location. If you are looking to rehab property and then sell it, you can rehab several units at one time in one location. Furthermore, depending on where the property is located, the income you can make (rather renting or selling) is often much more then you could with a comparable single family home.
Also, the best rule to follow is to only purchase properties in areas in which you live or are familiar with, this makes them easier to manage. Let us say that an investor purchases several multi-units and a single family home that are all in a 20 mile radius within the town he/she grew up in. Doing this will not only make it easier to manage these properties, because of the closeness of their locations, but many problems can be avoided or foreseen because they were purchased in an area familiar to the investor. If an investor is already familiar with the area in which a property is for sale, then he/she may know what risks are involved with properties in that particular area. Then it is up to the investor to weight the risks involved and decide if a particular piece of property is worth purchasing. If the decision is made to buy, the investor knows what problem or problems need to be dealt with and can deal with them head on with no surprises.
Financial surprises can also be easily maintained or avoided if an investor knows and abides by his/her limitations. If you know that financially you only have enough to invest in or purchase 1 or 2 properties, then just purchase or invest in 1 or 2 properties. Don’t go overboard in trying to make large sums of money quickly, when you can invest smaller within your financial limitations. This will allow you to reinvest in more real estate later, as your finances grow. Ultimately, this will produce a more stable and profitable investment in the long term and this is why we invest for our long-term financial stability.
Lastly I would just like to say, I know that many investors will say that they have managed and maintained at one time well over 10 properties, with well over 20-30 units total. This can be done, as I have done it too. However, doing this cuts out your work to have more risks; ultimately making it more difficult and stressful.
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