It can be hard to find a strategy that works for you as the financial benefits of real estate investment is discovered by more people. What works for one investor may not work with another. Here, we will ask you some questions to help you determine your strategy for developing a strong portfolio of properties in Austin.
Question 1: What are your long and short-term financial goals?
You should understand what you want to get out of investing before starting. It’s a good idea to begin with the end in mind and determine what type of properties will help you reach your goal.
Question 2: Is your portfolio diversified?
While you may have one area of focus, the best investors always allow for some diversification in their portfolio. In terms of real estate, a well-balanced portfolio will include single family rentals, commercial property, and even land.
Question 3: How much risk are you comfortable with?
Don’t invest anything you aren’t comfortable losing. How much are you willing to risk? You might have a vision for a fixer-upper apartment building you found. If done correctly, it could turn into a gold mine. However, with a fixer-upper, there could be more repairs than you bargained for. Never put yourself in a position where losing the investment would destroy you financially.
Question 4: How hands-on do you want to be?
Most real estate takes work. A larger building may require you to be onsite often. Real estate investing can turn into a full-time job, and your profits should reflect that. If you’re looking for something low-maintenance, investing in land may be the right choice for you.
Question 5: How much can you afford?
There are many numbers to run before investing in Austin real estate. What will you be bringing in monthly and yearly? You may not bring in your full estimated rent each month of the year. There may be repairs, vacancies, and more. With this in mind, what monthly payments can you afford for the property? If you are getting a loan, the interest rate could be higher than with a standard mortgage loan.
Question 6: Are you open to having partners?
The workload will be shared, but so will the profits. To find a good partner, look for someone who excels in areas that you might fall short. The best partners may think a little differently than you, but they will bring more to the table than you would have had on your own.
Question 7: What types of property are you interested in?
To be successful, choose something that is profitable, but also something that you enjoy. It will help you take more pride in the investment, and you will better enjoy the process overall. Maybe you have an apartment building but the repairs and tenant turnover is driving you crazy. A property like this might be more trouble than it’s worth.
Question 8: Have you considered how this will impact your taxes?
Never invest in Austin real estate without discussing the purchase with your accountant. Many people dive into a property purchase, only to find themselves buried in taxes and costs a year down the road. Look at the income, expenses, and cap rate. Overestimate your maintenance costs and plan accordingly.
Question 9: Are you using the investment proceeds for a specific purpose?
Some people use real estate to achieve a goal such as college or a new business venture. If you are using your investments profits towards school, for example, you might choose low risk investments. Some options to consider would be land or REIT’s. Carefully define the returns you wish to achieve, and create an investment plan to get you there.
Question 10: Do you have a strong team?
Top investors don’t get there on their own. They surround themselves with a team of agents, wholesalers, accountants, attorneys, and construction professionals who are the best in their fields. Before investing in real estate, ask yourself if you have a strong team in place to help you reach your goals.
When you are ready to start investing in Austin, we can help! Send us a message or give us a call today! (512) 345-9090