Historically, buying real estate has been a lucrative investment. "For the past decade, real estate has ranked as Americans' top investment pick, with 34% of Americans identifying real estate as the best long-term investment in 2023," according to Investopedia. "That puts real estate ahead of gold (26%), stocks and mutual funds (18%), savings accounts and certificates of deposit (13%), and bonds (7%) as the favored long-term investment."
As with just about any investment, buying real estate comes with its share of risks that need to be considered and addressed to succeed. Landlord Insurance can help protect you from some, but not all, of those risks.
Whether you want to purchase a property, fix it up, and sell it for a profit or rent it out and receive a monthly income from tenants, here are five tips to be successful in real estate investing.
- Determine Your Goal
Due to the high value and low liquidity of real estate investments, you must determine your goals before diving in or risk losing a lot of money. Do you want to buy a home to live in and build equity in rather than continue to pay rent? Do you want to buy a property and have a regular income through rental payments? Do you want to buy a property, hang onto it, and hopefully sell it for a profit, or do you want to buy a property, fix it up, and again, hopefully, sell it for a profit? You need to be clear on your goals before purchasing a property. - Do Your Research.
Again, unlike buying stocks and bonds, if something goes wrong, you can't quickly bail out of a real estate investment, so before jumping in, do your research. Determine if you are in a buyers' or seller's market to help you decide if now is the right time to invest in real estate. Find out how much of a loan you will qualify for and the amount of the mortgage payments. Research if the property you're considering buying is in a good location (still one of the most crucial factors in real estate investment profitability) and if the property is in good condition or will require costly repairs. If you're planning on renting the property out, ask if the property currently has a tenant, how much they're paying, the rate of vacancy, etc. You must also know the rules and regulations, such as zoning laws, required permits, etc. Before diving into real estate investment, do as much research as possible to help avoid costly mistakes. - Understand Your Expenses
Understanding your expenses is especially crucial when purchasing a rental property. You need to know approximately how much utilities, property taxes, and landlord insurance will cost. You need to allow for maintenance, repairs, improvements, and property marketing costs. Even if you're buying a property to immediately turn around for a profit, you need to figure in appraisal fees, home inspection costs, and closing costs. If you plan on doing work on the property before selling it, you need to determine the approximate cost of the work and business permits. - Have a Cash Reserve
Things happen - the building needs a new roof, a tenant doesn't pay, etc. Setting aside a reserve of money to help cover these unexpected expenses can mean the difference between success and failure. - Manage Risk
Managing risk can take many forms. Determining your goals and researching helps minimize the risk of getting in over your head or buying the wrong property. Understanding your expenses and having a cash reserve helps reduce the risk of being forced to sell the property at a loss. Ensuring the safety of your property and tenants - screening your tenants and installing smoke detectors, fire extinguishers, security cameras, etc. - can also help you manage risks. - Get Landlord Insurance
Another way to manage risk and protect your investment is with the right Landlord Insurance. It's best to consult an experienced insurance agent to ensure you have the right insurance to protect your property. For example, did you know that if a rental unit is vacant for an extended time, you may be required to purchase Builder's Risk Insurance because the risks associated with a vacant property are different from those of an inhabited property; therefore, your regular landlord insurance policy may not cover the damage.
Do You Have the Right Insurance for Your Investment Property?
Landlord insurance is essential for protecting your investment property, but you don't want to overpay for coverage. The independent insurance agents at American Insuring Group carefully compare rates and coverage from competing insurance companies to find you the right policy at the right price!
Call us today at (800) 947-1270 or (610) 775-3848, or connect with us online.
