New real estate investors tend to think in terms of up-front costs, ongoing or surprise expenses, and how it compares to the income and value their investment will bring in. These things are important, but, as a passive investor, how you manage your money plays a much greater role in your overall success.
During these troubled economic times, it’s more important than ever that investors are diligent in their money management. Here are five financial steps every real estate investor needs to take to secure their future success.
One of the key things to remember about investing in real estate is that it is a slow-building process. You won’t be successful overnight — and that’s okay. The earlier you begin, the more time you will have to grow your portfolio along with your wealth. Be okay with taking your time, even as you have plans to grow. One of the biggest mistakes new investors can make is scaling their portfolio too soon and spreading their resources too thin.
Assess what you can handle where you are now rather than rushing to where you want to be. While it certainly helps to have the support of a turnkey partner like REI Nation — providing you with financial advice, a personal portfolio advisor and dedicated management and renovations teams — you, ultimately, are the one who knows what you can handle.
Be sure to check out: Small Money Management Adjustments That Make a BIG Difference
While passive investors have partners who run the numbers for you, it doesn’t hurt to have your own know-how. Not only will it help you when assessing properties and portfolio performance, but it will allow you to better spot any discrepancies or unseen risks. Even if you only know how to calculate profitability, it’s somewhere to start. When you know what to look for and how to calculate it, you can better design your systems for understanding, managing, and growing your portfolio.
Real estate investors must have a “cushion” fund. This is the money that covers the unexpected — after all, properties can have unexpected problems, sudden appliance issues, or long vacancies. You need the resources to cover and outlast these problems so that you can experience the profits (and property values) waiting for you on the other side. Grow slow and sustainable.
As your wealth builds, maintain it by the way that you live. When that passive income begins to roll in, the temptation to spend it and upgrade your standard of living will certainly be there. And while there’s no harm in enjoying rewards sown and reaped, part of effectively scaling your portfolio is showing financial restraint. Make the sacrifices on the front-end. There will be time to rest on your investment laurels later. In the beginning, however, your mind should be on saving and reinvesting what you have. After all, the more steadily your portfolio grows, the more your profits will do the same.
One of the biggest incentives to invest in real estate over other assets is the tax advantages that come with it. As a new investor, one of the best things you can do is find an experienced tax professional to work with. You need someone who knows the investment game and is highly recommended by other real estate investors. The tax exemptions and incentives available for investors aren’t known to any and every professional. It’s best to work with someone who has plenty of experience in this area so that you maximize savings come tax time.
No time can make or break an investor more than the very beginning. You’re at the most risk for making mistakes and taking on unnecessary and unseen risks. Protect your financial future by partnering with REI Nation.
Your personal portfolio advisor will ensure that you stay on target with your goals, well-informed with your portfolio performance, and prepared to handle anything that comes your way.
Join the thousands of investors who have found success with REI Nation today!