Real estate Investments and Success by David Lindahl

In order to understand how to make a successful real estate investment, one needs to analysis the reasons for its failures. When you know where you can go wrong while making an investment, you’ll obviously be more cautious not to make those mistakes. Real estate investing is certainly quite boon-full when you gather as much knowledge as possible and work efficiently and smartly for its success. I too once stood where you are right now hoping for solutions and answers, chuckles Mr. David Lindahl. He states that there is only one reason for your investment to be a failure. Property fails because of its inability to generate cash flow. This is the primary reason behind an unsuccessful real estate investment. There are many mistakes on your part that could lead to this inability of the property. Let us take a look into them.

1. Diligence assessment implies poor property: Expertise is best for making wiser decisions concerning real estate properties. You may be a fresher on this field, but is wiser to go for an expert’s opinion and then make a call or judgment about a particular property. Diligence covers property’s condition, its structural issues, environmental issues and the property’s surroundings, and other building systems in the local neighborhood. The property should also cover appraisal, title, surveys and zoning laws. Poor calculations as a result of negligence will lead to wrong assessments. It is not surprising for the obvious failure that looms over your head. You need to have an accurate picture about the property and the present market situation.


2. Ignorance to local market condition: Awareness and focus is very important for everything, especially when you are handling huge sums of money in real estate. You need a lucrative deal and for that you need to understand the present market situation. Even a good property can be turned upside down when the market is bad and there is no cash inflow. You also need to be aware of demand and supply for your property type, rental rates, occupancy level, job growth, population increase and other such social factors that is bound to influence your investment. Without gathering all the details, don’t even think about taking chances.


3. Bad Debt could devastate you: There is no point when you have huge debts. Whatever, you might reap out of your property eventually goes for your debts. Understand that every property has operating expenses and in order to have a steady state for a foreseeable future your target debt covering ratio should be on the plus side. In my experience I always make sure that target ratio is around 1.25 or higher.


4. Property management is essential: The value of your property depends upon how well you have managed it for all the years you have owned it. Poor management will lead to losing money which obviously implies failure. Maintenance issues ought to be covered immediately and appropriately in an optimal manner. You need to be the manager or at least avail the services of a property management company for expertise when you lack the basic knowledge for managing your property.


5. Always Have an exit strategy: There is no perfect path for successful real estate investment. Market situations have always been fragile. So you should be wise enough to have a plan B. You should know how to get the money out of your investment just in case things don’t go according to your expectations. Circumstances are quite dynamic and you should be on the prowl to make strategic approaches towards handling the same.