Before the economic crisis hit the mainstream business world in Fall 2008, real estate investors were hit first, and hit hard. While the drop in real estate values was "historic" in its scope, it was still merely the latest in a regular cycle of real estate spikes and subsequent drops. Real estate investing, more than almost any other profession, requires a flexible business plan, that adjusts for the poor markets as they arrive, so here are a few tips to keep YOUR real estate investing business performing even when the market is not.
Tip 1: Routinely Analyze your Rental Portfolio Before you can address the problem(s), you need to identify them. Look over each of your rental properties' books, and determine which ones consistently perform well, and which ones routinely put you under water.
Tip 2: Creatively Address the Problem Rental Properties The problems that could be plaguing your rental properties are varied, so the solutions will be equally diverse. That said, the most typical problems include tenants who fail to pay regularly or abuse your rental property, frequent vacancies and insufficient cash flow. Some solutions to these problems include helping a problem tenant to move out in order to secure a conscientious one, offering incentives for early rent and immediate eviction notices for late rent, and signing a longer term rental agreement in exchange for an incentive.
Tip 3: Creatively Increase Rental Revenue Cash flow can be a problem, and one that's not easily solved. However, it may be possible to divide your available rental inventory and sign a rental agreement on each piece. For example, this may include dividing a single rental unit into two rental units, or signing a rental agreement on a detached garage space separately from the rest of the property, or even renting out a valuable parking space separately. The trick is to think outside the box, and consider what can be rented separately for more money each month.
Tip 4: Find the Right Team Every real estate investor uses a team of experts to work more efficiently, which can include property management companies, real estate attorneys, accountants, bird dogs, contractors, etc. How well do each of these people perform? What do they charge? Ask around at real estate investment clubs to get a sense of how other investors' team members perform and charge, to better evaluate your team. It may be that you need an accountant who's more of an expert in real estate tax law, or that your contractor overcharges, or your property management company has a poor record. Do your homework, and make educated decisions when affiliating yourself with team members.
Tip 5: Research and Strategize The best real estate investors are intimately familiar with their real estate markets, and make informed, educated investing decisions. What are the long term demographic changes in this neighborhood? What zoning and development changes are being planned? What large employers are moving to or from the area? Once you have your facts aligned, you can create a business strategy based with multiple exit strategies. An example may be buying a shell over the winter market lull, hiring contractors desperate for work during the slow winter months, and renovating the property just in time to sell in the summer rush. If that short term exit strategy fails, and the property does not sell within your allotted three month window, perhaps the second exit strategy is to sign a rental agreement with an option to purchase, and selling the property to the tenant with the help of a seller-held second mortgage. The third exit strategy may involve simply sitting on that rental agreement for a few years, allowing the real estate market to recover and your tenants to pay down your mortgage, and then selling when the market is hot again.
Both the real estate market and the broader economy go through boom and bust cycles, which must be adjusted for as necessary. By paying closer attention to each rental agreement, and each investment, you can improve your rental properties' performance, and by holding onto investment properties until the market improves you can elude the slow real estate market altogether.
Author Resource:-
Brian Davis is a mobile landlord and real estate investing writer, who regularly contributes material to real estate investing publications such as NuWire Investor and EZ Landlord Forms (who does provide a customizable rental agreement for each state), and contributes to a variety of real estate blog articles across the web.
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