Investment in any sector needs to be done carefully, after significant research and planning. As an investor, if you want to buy an investment property in Nashville, you need to consult the right people and conduct adequate research before purchasing real estate.
In our experience of over a decade, we have seen that new investors tend to make the same set of mistakes, when it comes to investing in property. Once you try avoiding these common mistakes, you can make much more profitable decisions with your real estate investments. Here are three crucial steps to avoid common investing mistakes:
1. Set Concrete Goals
Your goals can give a constructive direction to your investments. It makes more sense to enter the real estate business with tangible goals that you can achieve with proper planning and implementation, rather than simply purchasing a house. Often, investors get too excited about a property they find on sale for a great price and consider investing without knowing if it may be feasible in the long run, if its location is optimal or what their potential goals for the property would be.
To set goals for your investment, you must have clarity on a few things –
Know What You Want From Your Nashville Investment Unit
Ask yourself, what is it that makes you want to invest in real estate? Why are you buying a particular unit? This can help you understand what you want from the rental.
If you want to secure a source of income from the rental after retirement, the kind and location of the property you would invest in will be different. If you want to keep it as a secondary source of income, you should consider your time availability and choose a property accordingly. Whereas, if you are going to build a career in real estate, you must explore several different types of properties.
Your goals for the home will change depending upon your purpose for investing. As an investor building a full-time career in real estate, you may have to consider factors like building a diversified portfolio and the time and capital required for the same. If you are interested, we recommend creating a 5-year plan to speed up the process of becoming successful investors.
2. Work With a Proper Plan and Strategy
Once you know your goals, you must work out an effective plan and invest money into real estate investments. Suppose you do not accurately assess all the expenses and income and plan your investment accordingly. In that case, you might not make profits through the investment, even when the property is in demand.
Calculate factors like your ready capital to invest in a Nashville property. Estimate the amount of hard cash available to invest in real estate. If your goal is to buy a residential unit, check the prices of different types of residential homes like single-family units, multi-family properties, and vacation rentals.
To secure a property, you may also have to cover the costs of –
You will have to secure at least a 20% down payment to buy an investment property. This rule does not apply to purchasing a property for personal residential purposes.
You will have to bear a few charges like the Title Agent fees, transfer tax, and property inspection costs which can cost you $500, $300, and $250, respectively. The legal representation costs of buying a property can be nearly 1%.
If your credit score is good enough (ideally, above 620), you can get a loan to buy an investment property. However, the interest rates for investment properties are higher than residential/personal use properties. Therefore, you need to evaluate the costs with the help of a professional like a realtor.
Real Estate Agent/Property Manager Fees
If you have hired an agent to find the right property for you, the chances are that you might have to pay them a fee at the closing.
3. Collect Information and Do a Comparative Analysis
Investors often make the mistake of not doing enough research. To make a financially sound decision, you must gather as much information as possible about the market and the price trends and compare the rates to know what is best.
Research the Right Time of Year to Invest
Reports have shown that the winter season is the best time to purchase a property in Tennessee. In January, the listing price is typically over 8% lower in the state than the average listing price. Also, there are over 26% more houses to choose from in the month. Therefore, it can be the best time to buy an investment home. Do not make the mistake of purchasing an investment home during the summers when the market gets flooded with buyers and the rates are very high.
Know the Market Trends
Know if the current market is a seller’s or a buyer’s market. There is typically as good as no scope of negotiation in a seller’s market. On the other hand, you can get a home at a very competitive price in a buyer’s market, and there will undoubtedly be more properties to choose between.
A Few Additional Steps
Apart from the above-mentioned essential steps, some additional measures can help in avoiding common investing mistakes –
Learn Skillful Negotiation
You must use your market analysis to negotiate effectively. Brush up your communication skills, and convey your ideas confidently. Negotiation tactics will save you from overpaying for a home.
Understand All Landlord Responsibilities
Many homeowners jump into the real estate business without mapping out their tasks and responsibilities. Avoid this and study your duties as a landlord before buying a home. Keep the house habitable, create a legally compliant lease agreement, and respond to tenant requests. Additionally, you will have to advertise the property, screen and place qualified tenants, and renovate your Nashville home when necessary.
Get in touch with a reliable property management company like Omni Property Management. With our vast experience in popular neighborhoods of Nashville, TN, we know the ins and outs of the local market and can help you make the best and most profitable investing decisions.