When investing in real estate for the first time, there’s much to consider. Believe us, we know! 

It can be overwhelming. But it’s certainly not impossible.

The good thing about this business is that you don’t have to do it alone. First-time SFR investors can benefit from a turnkey model – allowing experts to come alongside them to advise, support, and grow their investment ambitions.

Some new investors make mistakes because they haven’t covered all their bases. Even those of us with support from a turnkey partner must be informed, diligent, and wise when evaluating their investments. Here are a few things inexperienced real estate investors forget. Don’t make the same mistakes!

6 Considerations New SFR Investors Often Forget

1. Larger Rental Market Trends

It’s all too easy to remain focused on the now. Remember, though, that the rental market now is not the market of the past. It may not be the market of the future, either. Investors must wisely consider population growth patterns, rental demand, and rental rates in their investment markets. The past doesn’t guarantee the future, but we can learn from it.

Is growth consistent? Is market momentum sustainable? Don’t take current conditions at face value. Examine how the market got there and where it’s headed.  Sometimes, this is easier said than done and I understand that.  This is where an experienced Turnkey real estate provider can help.  They should have the key data points that show trends and expectations and be able to make a case for what the larger rental market trends are heading.  This is information that should already be available for you.  

So, rather than looking for the data yourself, ask your provider to explain and show why they like the markets they are choosing and what their expectations are for the future.

2. Hidden Costs

We must take stock of all associated costs when considering an investment opportunity. This is true whether you’re budgeting for a property acquisition or thinking about ongoing expenses. When buying, consider fees associated with inspections, closing costs, insurance, and renovations. As an owner, consider property taxes, HOA fees, management costs, and maintenance.

These costs aren’t hidden in that someone is trying to trick you. They’re hidden because you may not consider the complete picture of ongoing expenses from the outset – and blow your budget in the process!

Again, a high quality Turnkey provider is going to be up-front and direct about all of the costs associated with your property.  This information is disparate and takes time to compile.  However, the best companies know how valuable it is to be accurate and will have the data before you ask!

3. Alternative Tax Strategies

Are you aware of all the tax advantages and strategies at your disposal? We’re not just referring to deductions here. Think about things like the 1031 Exchange. There are also tax implications for how you invest, such as through a self-directed IRA. There are many ways to defer and eliminate taxes…don’t miss out on these opportunities!

We work with 1031-exchange clients on a monthly basis and are happy to answer questions and even refer investors to quality intermediaries to handle the paperwork and legal structuring.  This is one of the biggest reasons real estate investors choose real estate to begin with.

4. Investor-Friendly Financing Options

As an investor, you have more options than you think. Listen to the recommendations of your turnkey partners, but do your own research, too. Some lenders will be more investor-friendly than others. Other times, your personal history with a lender might help secure a better deal. Shop around and see.

We have over two dozen lenders that we trust and have worked with closely over the years.  We trust them because they have proven to be good partners in the way they communicate and assist real estate investors working with our company.  However, we always stress that we met most of these lenders through investor relationships.  We were introduced to them by our clients.  If you have a lender that you work particularly well with or has qualified you as an investor for an attractive financing offer, that is always an option with REI Nation and should be with other companies as well.

5. Business Structure

It’s tough to retroactively change your business structure. Investors should consider this long before they actually start buying real estate. How will you keep business and personal finances separate? Do you need to open a new account? Form an LLC? Establish a self-directed IRA? Investigate the pros and cons to see the best option for you.

With that being said, I am not a fan of getting too complicated too early.  Much has been made about he litigious nature of real estate, but I can directly advise that being properly insured is much more important that choosing entity structures to hold properties.  There is a proper time of course and understanding is important which is why we include this tip, but entities are not required and can often be complicated and difficult to upkeep properly.  It is definitely an area where investors need to understand what they are doing and why.

6. Your Portfolio: The Big Picture

Finally, there’s the question of portfolio cohesion. Sometimes, new investors don’t fully know what they want or how to get it. We must constantly evaluate and reexamine our portfolios in light of our financial goals. Does each investment serve a purpose? Are they accomplishing a unified vision? Be thoughtful and purposeful with every choice you make for your portfolio!

I like to think that our portfolio advisor team is good about helping investors have a big picture perspective.  In other words, a quality investment in some other area that is producing the exact return an investor is looking for, is not something that we would advise selling and putting into real estate.  At the same time, we routinely advise investors to not put every dollar they have into an investment, but to keep a hefty and reliable reserve account.  

The big picture of an investment portfolio often includes multiple pieces and different investments and expectations.  It is important to remember that no matter where real estate investing fits into your over-all plan, keeping perspective on your long-term goals is paramount.

Whether you're new to investing, new to passive investing, or you know your stuff—we've got the right team to support you right where you are!