Investors: Change Strategy And Buy Now
Despite all the bad news about real estate, I think there is still money to be made for real estate investors in today's market.
In order to make it, you have to shift your strategy from the one you had in 2002 to the one you need in 2011.
Back in the days of real estate's "great run-up", most of the property investors I worked with -- and this included myself -- were primarily concerned with property appreciation. They treated real estate like a stock investment. They wanted the value of the property to go up (like a stock) and treated rent as a little added bonus (like a dividend). As long as you broke even on your expenses from the rent, well, everything was okay because the building was appreciating so rapidly. When you sold the building, you stood to make a handsome profit; or so the prevailing reasoning for many investors at that time.
If you bought the property by the early 2000's and sold it by the end of 2006, you probably made out pretty good based on the stock market approach to investing in real estate.
The thing of it is, we are now living in the days of the "great run-down" and you can no longer treat real estate like a commodity. You have to shift out of that stock-market mentality and adjust your money-making strategy to reflect the way the real estate world is today.
This means your strategy has focus on your rents, not on property appreciation.
For the foreseeable future, the market value of real estate is likely going to continue to fall or, at best, become pretty flat. So, the wise investor will shift his goals to making money every month from the collection of rent payments. You have to make certain that your rent rates cover all the costs of owning and operating the building while providing a profit to you for your risk as the owner and your role as the property manager.
In other words, you have to start acting like a real landlord, not a building owner. And, you have to start operating your investment property like it was a business, not a stock investment or hobby. In addition, you have to begin dealing with tenants in a much more businesslike manner, and this includes collecting rents on time and, if necessary, removing tenants who fail to make timely and full payments.
Now, I know that some of you are going to be reluctant to run your rental property like a real business. That's okay. That's why there are companies out there who will do it for you. They are called Property Managers, and for a percentage of the monthly rent they will do virtually everything to make sure your property is operating the way it should and making money the way you want it to. Essentially, you can arrange things with your property manager so that your only involvement is to take your check to the bank at the end of the month -- heck, you can probably even have that direct deposited to your account so you don't have to drive to the bank!
In the local MLS right now, I see dozens of good looking, well-maintained, properly priced duplexes, triplexes, quads and small apartment buildings all over Tampa Bay. If you are new to investing in real estate, owning one of these smaller properties is a great way to get your feet wet and find out if you like being a landlord. Also, buying a single family home in a nice neighborhood is also a great way to get into the investment end of owning real estate. With so many short sales and foreclosures in today's market, prices for many of these properties make them very attractive from an investor viewpoint. So, you might want to give it a try without risking your entire future.
Just remember this: The strategy now is to make a profit every month from your rent. If the building appreciates in value sometime in the future, that's just icing on the cake.
-30-
In order to make it, you have to shift your strategy from the one you had in 2002 to the one you need in 2011.
Back in the days of real estate's "great run-up", most of the property investors I worked with -- and this included myself -- were primarily concerned with property appreciation. They treated real estate like a stock investment. They wanted the value of the property to go up (like a stock) and treated rent as a little added bonus (like a dividend). As long as you broke even on your expenses from the rent, well, everything was okay because the building was appreciating so rapidly. When you sold the building, you stood to make a handsome profit; or so the prevailing reasoning for many investors at that time.
If you bought the property by the early 2000's and sold it by the end of 2006, you probably made out pretty good based on the stock market approach to investing in real estate.
The thing of it is, we are now living in the days of the "great run-down" and you can no longer treat real estate like a commodity. You have to shift out of that stock-market mentality and adjust your money-making strategy to reflect the way the real estate world is today.
This means your strategy has focus on your rents, not on property appreciation.
For the foreseeable future, the market value of real estate is likely going to continue to fall or, at best, become pretty flat. So, the wise investor will shift his goals to making money every month from the collection of rent payments. You have to make certain that your rent rates cover all the costs of owning and operating the building while providing a profit to you for your risk as the owner and your role as the property manager.
In other words, you have to start acting like a real landlord, not a building owner. And, you have to start operating your investment property like it was a business, not a stock investment or hobby. In addition, you have to begin dealing with tenants in a much more businesslike manner, and this includes collecting rents on time and, if necessary, removing tenants who fail to make timely and full payments.
Now, I know that some of you are going to be reluctant to run your rental property like a real business. That's okay. That's why there are companies out there who will do it for you. They are called Property Managers, and for a percentage of the monthly rent they will do virtually everything to make sure your property is operating the way it should and making money the way you want it to. Essentially, you can arrange things with your property manager so that your only involvement is to take your check to the bank at the end of the month -- heck, you can probably even have that direct deposited to your account so you don't have to drive to the bank!
In the local MLS right now, I see dozens of good looking, well-maintained, properly priced duplexes, triplexes, quads and small apartment buildings all over Tampa Bay. If you are new to investing in real estate, owning one of these smaller properties is a great way to get your feet wet and find out if you like being a landlord. Also, buying a single family home in a nice neighborhood is also a great way to get into the investment end of owning real estate. With so many short sales and foreclosures in today's market, prices for many of these properties make them very attractive from an investor viewpoint. So, you might want to give it a try without risking your entire future.
Just remember this: The strategy now is to make a profit every month from your rent. If the building appreciates in value sometime in the future, that's just icing on the cake.
-30-
posted by Terry Ward at 4:41 AM
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