Being successful in real estate investing requires more than just earning a good profit. You also need an effective strategy for finding and buying new properties, managing tenants, performing maintenance, paying the bills, and continuing to learn.
If you’re struggling to acquire profitable investments, find it hard to manage tenants, or can’t seem to get organized, the following strategies can help you become more successful with your investments.
1. Hire out as much as possible
As long as you’re the one responsible for managing every aspect of your business, you’re going to struggle to reach maximum profitability and it will be even harder to scale.
Here’s what you can outsource to be more efficient:
- Property management. It’s time-consuming to be the landlord for your properties. You’ll get more free time and serve your tenants better when you hire out your duties to a professional. For instance, Fort Worth property management company Green Residential takes on all landlord duties plus maintenance, repairs, and even bill management for their clients. This makes it easier for them to own multiple properties without having to worry about things slipping through the cracks.
- Marketing and advertising. Marketing your vacancies isn’t as easy as it seems. Depending on where you’re advertising, you might need to follow specific formats for your ads and if you aren’t a graphic designer, your images may not look good. It really takes an expert touch to craft effective ads that will not only attract applicants, but also disqualify the people you don’t want to apply without breaking any laws.
- Administrative tasks. Try outsourcing all those mundane, repetitive tasks you don’t like doing, like filing your taxes, organizing receipts, paying property-related bills, and sending notices to tenants when they’re due for some type of lease change. Anything that can be done inside of an application online can be outsourced to someone capable.
The more you hire out, the more time you’ll have for more important things.
2. Be selective about your acquisitions
From time to time, you’ll come across some properties that seem like they’re priced at an incredible deal, and that may be so, but there’s always a reason. If you find a property priced lower than market value, be direct and ask the seller what’s wrong with the property. Most people will be straightforward about what’s going on when they’ve lowered the price to account for some type of defect or disadvantage. For example, it might be that there’s a train that shakes the house every day at 3:00 p.m. Always ask for specifics.
Aside from being cautious about low-priced properties, be selective with your neighborhood and make sure you’re buying in an area that has a good job market and a stable rental market. Although, sometimes it’s appropriate to buy properties in a seller’s market even if they aren’t ideal. It all depends on your personal preferences and overall investment strategy.
Avoid fixer-uppers if you aren’t handy and don’t have the time or interest in managing a complete renovation from start to finish. Even if you hire people to do it for you, you’ll still have to run the show.
3. Charge full market rent
Having successful investments requires charging market rate rent. It doesn’t make financial sense to pay costs that increase, like property taxes and higher fees for maintenance and repairs, while still charging the same amount of rent. When your costs go up, you need to raise the rent.
Sometimes it’s okay to give a tenant a deal to renew their lease, especially if they’re an excellent tenant and pay rent on time. However, you don’t want to get stuck charging the same amount of rent in 2024 that you started charging your tenant when they moved in back in 2019. If you do this, you’ll be losing money. You’ll also lose your tax breaks, too.
4. Don’t rent to friends and family
As much as you might want to do someone a favor, avoid renting to relatives and people you know. They will be more likely to take advantage of you and expect favors. For instance, if you rent to a sibling and they’re late with the rent, they’ll probably expect you to forego the late fees. If you pursue late fees, they might get upset and put a strain on your relationship.
5. Buy multiple properties
Last, but not least, one of the most effective strategies for success is buying multiple properties. The more rental properties you own, the more money you will make. Once you develop a system for acquiring and managing your properties, this will be much easier.
FAQs
Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation. Real estate values tend to increase over time, and with a good investment, you can turn a profit when it's time to sell.
How to be successful in real estate investing? ›
- Make a Plan.
- Know the Market.
- Be Honest.
- Develop a Niche.
- Encourage Referrals.
- Stay Educated.
- Understand the Risks.
- Invest in an Accountant.
Real estate investors make money through rental income, any profits generated by property-dependent business activity, and appreciation. Real estate values tend to increase over time, and with a good investment, you can turn a profit when it's time to sell.
Why is it important to become a successful real estate investor? ›
You Could Earn Passive Income
You can use the income earned to build a larger real estate portfolio, pay monthly expenses or save for other financial goals. A few ways to earn passive income with real estate investments include: Buy and hold properties: When you rent properties, you earn passive income.
Is real estate a good investment strategy? ›
Investing in real estate usually results in asset appreciation over time. So long as you purchase a property in a strategic location, at a fair price, and at the right time, your property value should naturally grow.
Is it easy to be successful in real estate? ›
Earning a living selling real estate is hard work. You have to be organized in order to keep track of legal documents, meetings, and all the tasks that go into multiple listings. You may go without a paycheck for periods of time because the work is often commission-based. If you don't sell, you don't earn anything.
What real estate strategy makes the most money? ›
Investment properties (rental real estate)
The most obvious way to make money in real estate is to buy an investment property (or several). You could buy a home and rent it out to long-term tenants or purchase a multi-unit rental property or small apartment building.
Is real estate a successful business? ›
Success in real estate is not simple. With the right approach to business planning, service marketing, and lead generation, however, it's possible to build a real estate business that helps you achieve life goals and establish a firm financial future.
Who is the most successful in real estate? ›
Top Agents in the United States – Individuals By Volume
| Rank – National Volume | Full Name | Company |
|---|
| 1 | Ben Caballero | HomesUSA.com, Inc. |
| 2 | Jay Kendall | Watson Realty Corp. |
| 3 | Ralph Harvey | ListWithFreedom.com |
| 4 | Drew Fenton | Carolwood Estates |
78 more rowsThe last research I saw about this noted that the failure rate is over 90%, most of that percentage leave the business within 6 months, the rest wash out within 2 years.
Investing can be complex, but some of the most important habits of successful investors are pretty simple. If you build a smart plan and stick with it, save enough, make reasonable investment choices, and be aware of taxes, you will have adopted some of the key traits that may lead to success.
Is real estate a smart investment? ›
Investing in real estate can be a good idea if done thoughtfully and strategically. It offers the potential for steady income, capital appreciation and tax benefits.
What do the most successful investors do? ›
Successful investors often focus on companies with strong fundamentals, such as low debt, high profit margins, and ample cash flow. Investors who diversify their portfolios and manage risk effectively are more likely to achieve long-term success.
What is the 5 rule in real estate investing? ›
That said, the easiest way to put the 5% rule in practice is multiplying the value of a property by 5%, then dividing by 12. Then, you get a breakeven point for what you'd pay each month, helping you decide whether it's better to buy or rent.
Is real estate very profitable? ›
Real estate is undoubtedly one of the most lucrative industries in the world. Different sectors within real estate provide unique opportunities for good returns on investment. Here are the five most profitable real Estate ventures and the key factors and trends contributing to their success.
Which is a form of passive income? ›
Passive income includes regular earnings from a source other than an employer or contractor. The Internal Revenue Service (IRS) says passive income can come from two sources: rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends.
What is the smartest way to invest in real estate? ›
5 Ways to get started in real estate investing
- Buy REITs (real estate investment trusts) REITs allow you to invest in real estate without the physical real estate. ...
- Use an online real estate investing platform. ...
- Think about investing in rental properties. ...
- Consider flipping investment properties. ...
- Rent out a room.
5 Most Profitable Real Estate Ventures
- Residential Real Estate Development. ...
- Commercial Real Estate Investment. ...
- Real Estate Crowdfunding. ...
- Real Estate Technology ( PropTech) ...
- Short-Term Rentals and Vacation Properties.
Real estate investment has long been a cornerstone of financial success, with approximately 90% of millionaires attributing their wealth in part to real estate holdings. In this article, we delve into the reasons why real estate is a preferred vehicle for creating millionaires and how you can leverage its potential.
How to avoid 20% down payment on investment property? ›
Yes, it is possible to purchase an investment property without paying a 20% down payment. By exploring alternative financing options such as seller financing or utilizing lines of credit or home equity through cash-out refinancing or HELOCs, you can reduce or eliminate the need for a large upfront payment.
