Every investor benefits from the counsel of a financial advisor. Ideally, your advisor knows you, what you want and need, and the essential aspects of your investment strategies. Their perspective and know-how help construct effective action plans and mitigate risk along the way.

But advisors aren’t just there for big-picture talk. Before you move forward with a property acquisition, consult your advisor to ensure you’re making the best decisions possible for the health of your investment portfolio.

As a passive real estate investor, here are some key topics to cover:

If you were to ask a room of SFR investors what the most crucial factor in success was, you would get a whole array of answers: the location, the property itself, the property management, accurate number-crunching…the list goes on!

What’s the best way to buy an investment property? Just as there are many investment strategies, various financing options are at your disposal, each with drawbacks and benefits. While we certainly have avenues we recommend more than others, every investor should be well-informed about every option.

Real estate investment is an enormously varied industry. Different types of properties, countless markets, real estate classes, and strategies are involved. On one hand, this is beneficial because just about anyone can find an approach that works with their financial goals. On the other hand, so much variety can be daunting!

Though passive investors may not be involved in the day-to-day operations of their rental properties, they have plenty of responsibilities. One such responsibility is in managing and maximizing cash flow. This task starts from the outset as you weigh the cost of a rental property and its ongoing expenses against cash flow potential. But it doesn’t end there!

Those ongoing costs tend to increase over time – and part of your job is mitigating those increases to best preserve and maximize passive income.

Further Reading: Top Tips for Increasing the Profitability of Your Investment Properties

Mortgage rates are the highest they’ve been since the Great Recession. Current 30-year fixed rates hover in the 6 to 7% range. Historically speaking, that’s nowhere near the highest they’ve been (that title belongs to the average in October of 1981 at a sickening 18.82%. Yikes!), but current rates are coming off all-time lows in 2020 and 2021. 

With home prices higher than ever, it is no surprise that homebuyers are waiting patiently for mortgage rates to come down and ease sticker shock. After all, the higher the asking price, the more the percentage matters.

But is it wise to wait for rates to drop?

We think not. As real estate investors, you risk more in the wait than in taking the chance in the market as it is. Here’s why:

Investing out-of-state is one of the best things a passive real estate investor can do for their portfolio. After all, investing beyond your local market comes with some distinct advantages, such as:

When investing in real estate, some risks are obvious. Others? Less so. Effective risk management involves recognizing and mitigating all risks, from the common to the rare. Are the chances slim? Sure. But you’ll be kicking yourself if you don’t do your due diligence in handling these sneaky buy-and-hold real estate investing risks! 

We get it – houses are expensive, now more than ever. It’s only natural that investors would turn to low-cost properties. On the surface, there’s clear appeal: less capital upfront for an income-generating rental property. Why wouldn’t you go with the cheapest houses you can find?

If you’re like many people, you like to browse real estate listings. Sometimes, you come across a property with a shockingly low price tag in a great part of town. You might think, “Wow! What a deal!” Then, you start looking at the pictures and realize that the whole thing has been stripped down to the studs, and it would take double the asking price or more to get it habitable. Oof. 

That opportunity might excite some more hands-on, flip-minded investors, but it’s not for us. At that point, it’s pretty evident that the property will cost you far more than the seemingly low asking price. But it’s not always so obvious. Some properties may not look the best – they’re serviceable – or be in the best neighborhood, but they’re affordable, so why not?

Well, we’re here to tell you. Here’s why investors shouldn’t target low-cost properties.

For real estate investors, it’s relatively easy to look at all the news coming out about the real estate market and lament. You might feel like there’s no place for you anymore, and investing is too hard. Believe us, that’s not the case! Part of the problem is that many of these reports and analyses look at overall medians and averages. 

While these are concise ways to talk about overall trends in the country, investors need to zoom in. The real estate market is not uniform. It varies, and investors must take advantage of it. We found these maps by ResiClub (courtesy of Fast Company) helpful in illustrating this point.

These maps effectively represent median home prices within individual markets across the country. While the $380,000+ median price sounds scary, we must recognize that that number doesn’t reflect every market.

So, what do these maps tell us about the real estate market…and investing?