Real estate investing can be very lucrative, but it is essential that you know the numbers every step of the way. If you want to increase your earning power to create a better lifestyle for your family, then you need to focus on the bottom line without becoming emotionally attached to the investing efforts.
You might have a consistent stream of deals moving through, but you can quickly go under if you don’t manage your finances. Here are a few things that you need to consider before you move forward with an investment property:
Scrutinize Every Expense
Even though you need to spend money on the renovations for the home, it is essential that you are picky about where the money is going. Set a budget in advance and make sure that you stick to the plan when the home is being renovated.
It is important to choose quality hardware and materials. At the same time, you need to be selective about how much you spend on each item. For example, skip the $2,000 chandelier for the dining room and select a cheaper alternative instead. Then, you can use the difference in cost to replace the floors or spend the money on upgrades in other areas of the home.
When you are thinking in terms of thousands or tens of thousands of dollars in profits, it is easy to assume that a few hundred dollars here and there isn’t that big of a deal. But, these costs can add up over time.
Look at Area Comparisons
Do your research before buying a property, so that you know there is an opportunity to make a profit on the renovated home. For example, if you buy a $200,000 home that will need $25,000 in renovations, you need to make sure that other comparable properties are selling at a higher price. If the comparisons are only averaging around $215,000, then you will have a hard time recovering your investment on the property.
Find the averages in the area, know how much you will be spending on the renovation costs, and then work the numbers to be sure that there will be money left over for you.
Maximize Your Investment
Set your budget for the renovations, then look for ways that you can maximize your return as much as possible. Certain home improvements can go a long way to boost the value of the property, while others might not be such a great investment.
For example, updating the kitchen can be an excellent investment since most buyers want a high-quality kitchen for their family. On the other hand, installing a pool in the backyard probably won’t be a good investment, because it won’t increase the value of the property enough to cover the costs of the installation.
Do you need help choosing the best homes for real estate investing? At DUFFY Realty, we are dialed into the Atlanta real estate market, and we can help you find the properties that fit your requirements. Contact our team right away to learn more about the services that we offer: (678) 318-1700