As a new real estate investor, the prospect of tossing down hundreds of thousands of dollars on a property can be quite scary, but there are a number of strategies that can be utilized in order to reduce the risk associated with real estate investing.
Consider these tips to slash the risk you’re facing as an investor.
Verify the Property Lines
Looking at the actual property can be deceiving when it comes to evaluating property lines, as fences and even structures can sometimes be erected in a less-than-logical location.
For instance, half of the garage or shed may actually be located on a neighbor’s property. Or that fence may be well inside (or outside) of the actual property lines. These discrepancies can make a property hard to sell or you may believe you’re getting more than is actually the case.
So examine a map of the property during your visit and pull out a tape measure or measuring wheel to get an accurate idea of where the property lines are located.
Clear and Insurable Property Titles
Many real estate investors are attracted to foreclosure properties, and while they can bring a tidy profit, they can also bring other unexpected issues that can make for a situation that’s akin to a nightmare.
During the due diligence and research process, investors typically check to ensure that the property’s title is insurable, but it’s also essential to verify that the property’s title is free and clear of any other claims. It’s important to note that an un-clear title can sometimes be insurable, so don’t let this fact deceive you into assuming that the title is clear.
Check and double check to ensure that the property has a clear title. Otherwise, you could face a situation where the taxman or another entity comes after you seeking a piece of the equity pie.
Be Prepared to Own the Property Indefinitely
Many real estate investors lose money because they find themselves in a situation where they need to get their investment funds back, so they sell the property at a lower-than-ideal price.
This sort of situation can arise due to many factors, such as an unexpected change in the investor’s financial situation or a slip in housing prices.
As an investor, you want to be in a position where you can hold the property until you find the ideal buyer who’s willing to purchase the real estate for the right price.
Choose your investments wisely, leave yourself a healthy “emergency fund” cushion and do everything you can to avoid placing yourself in a situation where you need to sell the property fast, for a price that’s lower than what you might see if you were to keep the property for a longer period of time.