Jan. 9, 2019
The real estate market is always changing. What may have worked 20, 15 or even 5 years ago, may not work now or in this new year. Real estate investors who stay rigid and play by old rules may be outpaced by their more flexible, informed and relevant industry counterparts. As we head iinto a new year, now is an excellent time to set intentions and take initiative for future growth and stability.
As a headline, "Real Estate Investing" sounds like an expensive venture costing hundreds of thousands of dollars in initial investment. Fortunately, you don't need six figures in the bank to be a real estate investor today. It really starts with a solid financial plan.
Many people who have reached financial independence have done so investing in real estate (it's one of the most common ways to become a millionaire). This might seem like an impossible achievement if you're only looking at the end result, but by starting out with small steps and keeping dedicated, you can achieve impressive results.
Consider your potential for higher returns compared to other asset classes; such as investing in the stock market - Real estate has had an average annual return of 11.42% since 1970...meanwhile S&P500 had an average annual return of 10.31%. Plus you have direct control over the assets and decision making processes that can affect their growth in value.
Forbes asked 14 members of their Real Estate Council to give insight on what every real estate investor should consider moving into 2019 and we thought we'd share them here to help give you some insight as you go forward:
1. Pay Attention To Your Future Market Value
"The market is always changing. What we're seeing is that an increase in interest rates is affecting some price points more than others. If your FMV is falling in a range that is affected, allow yourself a 10% contingency in your spread for strategic pricing or underpricing, and give yourself enough margin to work with the offers that actually come in. Look at the renovation game as a quantity game."
- Courtney Poulos, ACME Real Estate
2. Carefully Study The Market Data
"The first key to success for investors in 2019 is the same as it is in any year: Make sure you understand your market. This requires a lot of work, spending many hours studying data. That data will tell you the story you need for the upcoming year. Becoming an expert on inventory, neighborhoods, city trends, interest rates, construction costs and market needs allows for great decision making."
- Brian Lawton, Property Revival Realty
3. Say "Thank You"
"Say 'thank you' to your clients, vendors, suppliers, team members boss and so on. Remember that you didn't do it all by yourself. This is not a definitive list: Feel free to add to it as you see fit."
- Michael J. Polk, Polk Properties / Matrix Properties
4. Reserve A Financial Cushion
"Every investor should make strides to have several months of reserves in a separate bank account held for unforeseen maintenance issues or an unexpected vacancy. They should also save additional funds to buy another investment property."
- Tanya Delahoz, Dwell Summit
5. Get A Handle On Taxes
"Talk to your CPA about maximizing deductions and write-offs by contributing to self-directed retirement accounts, restructuring portfolios, reinvesting gains, prepaying expenses, donating to charity, gifting inheritance money to heirs early and launching new business units. If you can save double digits on taxes, you automatically build in more profit to your investments."
- Kent Clothier, Real EstateWorldwide
6. Treat Market Slowdown As An Opportunity
"The market may be cooling off. Let all the other investors hide while you pick up the opportunities that didn't make sense a year ago. Get yourself ready to jump on the deals that fall into your zone. Values may level off or decline a bit. Rents should stay strong. This means there will be opportunities for buy and hold real estate investments. Don't listen to the noise about the market."
- Noel Christopher, Renters Warehouse
7. Consider Rental Properties For Income
"Flipping properties doesn't go as smoothly as it looks on TV. With younger generations staying in the rental market longer, it would be beneficial to investors to consider investing in properties that profit from rentals rather than the traditional flip sale."
- Beatrice de Jong, Open Listings (YC W15)
8. Learn About Opportunity Zones
"Real estate investors should learn as much as possible about newly passed Opportunity Zones. Congress has potentially provided investors with a once-in-a-lifetime possibility. Opportunity Zones are a community development program to encourage investment in low-income communities. They provide a major tax incentive for investors to reinvest their unrealized gains into funds that are dedicated to investing in these areas."
- Hunter Perry, Compass
9. Apply For A Contractor's License
"One method a real estate investor can use to increase profits is cutting out the middleman by obtaining a contractor's license. When you must hire a general contractor to pull permits and manage a job, it can be challenging to make money on rehab projects for income property or resale. It also makes it more expensive to get maintenance and improvements done on a rental property."
- Joe Houghton, RE/MAX Results/The Minnesota Property Group Team
10. Focus On The First-Time Homebuyer
"Interest rates are steadily rising, and with the stabilization of the realestate market, many buyers who already own a property have a lower likelihood of moving up. On the other hand, the first-time homebuyer still wants to own property, and with FHA financing and lower down payment requirements, first-time homebuyers are more likely to continue their pursuit of real estate. Flip a starter home!"
- Mor Zucker, Team Denver Homes - Kentwood Real Estate
11. Make Sure You've Double-Checked The Details
"Have a clear and concise plan going into the new year of what type of investments you will be making in 2019. This will help you plan out your capital reserves, cash flow and marketing for the coming year. Also ensure you have all the right team members on your team, in the right seats, so their focus is enhanced and efficiency is improved going into the new year."
- Ali Jamal, Stablegold Hospitality LLC
12. Set Up A Self-Directed IRA
"A good chunk of many people's wealth is in their IRA, and many people don't realize that you can convert that IRA into what is called a "self-directed IRA," or "checkbook IRA." By getting it all set upnow, you will be ready to take advantage of opportunities as they present themselves in 2019."
- Holly Williams, MQ Ventures, LLC
13. Assess Your Equity
"Changes to your real estate portfolio don't happen overnight, so it's time to determine if it's time to sell, buy more or transition into other sectors. Here is how you evaluate this situation. Ask yourself,
'If I had this cash (current equity) in hand, would I make this purchase now based on the expected rate of return?' Just reverse the scenario, and you'll know what to do!"
- Justin A Core, Core Group Real Estate, LLC
In the Myrtle Beach real estate market, there is a unique opportunity for investment in vacation homes and other short-term rentals as well as traditional property investment routes. If you're interested in starting...or expanding...your real estate investment portfolio, let's talk: Jeff Casterline 843.424.6900