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6 Factors to Keep in Mind Before Investing in an Income Property in Dallas (2019 Update)

Real estate is one of the fastest growing investment sectors in Dallas today. With booming industry in the Dallas/Fort Worth area, the rental market is in high demand, and there are numerous investment opportunities for individuals and investment groups to see great returns on income properties. However, before you dive in, read these six factors to keep in mind before investing in an income property in Dallas.

1. Know Your Budget

First and foremost, the key to operating at an acceptable risk level is to only invest money that you are willing to lose. With the incredible growth rate in the real estate sector in Dallas, you are far more likely to win than lose, but every investment you ever make will come with the risk of loss. A savvy investor will always operate within an acceptable risk level.

2. Have an Exit Strategy

Next, a savvy investor will have a contingency plan in case the investment goes sour. For investors flipping houses, they will usually choose to fix and hold a property rather than flip it immediately, or they may sell to a real estate wholesaler to minimize loss and move on to the next investment. Whatever style of investment you are considering, you should first work out your exit strategies to ensure that you will be able to continue to grow your wealth, even if the income property you are investing in right now is a failure.

3. Quality Property Management Is Key

If you are purchasing investment properties to increase your passive income, you will more than likely be buying rental real estate. If this is the case, you will not want to act as landlord for these properties. For group and trust investments this is not even an option, but even for individual investments it is not the best idea. Simply put, attempting to DIY your property management responsibilities is a huge time sink and will not garner you the profits you want.

For that reason, it is absolutely essential to find a good property management firm to handle your real estate marketing, tenant acquisition, maintenance, repairs, bookkeeping, etc. Finding a good property management firm to take care of all of this for you will ensure that you get more out of your income properties.

4. Know the Market Where You’re Investing

Of course, if you are not well acquainted with the real estate market where you’re purchasing your income property, it may not matter whether you have a decent property management firm on your side or not. Understanding and gaining familiarity with the market where you’re purchasing property is of the utmost importance when choosing investment real estate. If you perform your due diligence and research the market’s activity over the past four, six, twelve, and eighteen months, you will get a good idea of its current trends, its history, and what it is most likely to do in the next few years and months.

5. Look for Catalysts in the Area

Understanding the movement of the market isn’t the only factor in getting to know the area where you’re making your purchase, though. You should also familiarize yourself with the physical layout of the area and what’s going on there. Look for signs and catalysts of growth, including new schools, grocery stores, parks, and other attractive amenities. These are all signs that your area is in a growth cycle and will continue to show a favorable market in the future.

6. Don’t Buy for Appreciation

Finally, when you choose your income property, do not buy it for its appreciation potential. This should only be a secondary concern, as it is not guaranteed. Instead, buy your property based on its current value and its immediate earning potential, and you’ll get a lot more of your investment.

Consider these six factors to keep in mind before investing in an income property in Dallas, and you will have the tools you need to make the best decision for your portfolio.

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5 Mistakes That Everyone Makes While Investing in a Property (2019 Update)

Everyone makes mistakes. Whether you are just beginning to build your real estate investment portfolio or you’re diversifying with more commercial properties to grow your wealth, you are not immune to the top five mistakes that everyone makes while investing in a property. If you can avoid these mistakes, you will significantly reduce your risk level on any investment, and you will greatly increase your chances of seeing profitable and fast ROIs.

1. Failure to Research the Market

First of all, whether you are investing in an REIT (real estate investment trust), using a real estate crowdfunding site, or joining an investment club, you should first do your own due diligence before you put any money in.

What kind of due diligence should you perform on a real estate investment? First, you’ll want to thoroughly research the market in the area over at least the past eighteen months. Check out vacancy rates for both residential and commercial buildings near your property’s site. Then you should look at other developments in the area, as well. Is there a positive catalyst (such as a new school, park, shopping center, etc.) nearby that will bring in more residents and businesses? Would your building and your tenants act as that catalyst?

If you know the area, its market trends, and what’s going on with other developments near yours, you will have a good idea of whether you are buying in a growing or dying market.

2. Failing to Develop an Exit Strategy

If you are purchasing shares in an REIT, do you know exactly what value your shares can drop to before you need to sell them to recoup your losses? If one of your real estate crowdfunding projects fails to launch, can the others support it? Can you afford to lose your investment entirely if none of your projects succeed?

With an exit strategy, you will not be banking on best-case scenarios. You’ll know with confidence that should Murphy’s Law rear its ugly head, you will not be in major trouble and your investment portfolio will survive.

3. Basing Investments on the Promise of Appreciation

Whether you’re Investing in Commercial or residential real estate, you should never buy an income property based on the promise that it will one day appreciate in value. While you wait on appreciation, you’ll lose money on property costs. However, if you buy a property based on its current earning capabilities, it will honestly not matter at all whether or not the building appreciates over time. Your monthly or quarterly cash flow from the property will far outstrip any potential appreciation over the long term. That’s why savvy investors buy income properties for their current value and don’t care at all about appreciation.

4. Attempting to Invest Without Expert Advice

No matter how much research you do on your market and the area around your investment property, you will never have the same perspective that a true real estate investing expert has. Without expert advice on which investments are best for your portfolio and which ones are more likely to do nothing for you or hurt your net worth, you are likely to make a lot of bad decisions concerning your income properties.

With a good real estate investment firm on your side, you’ll have access to all of the financial and real estate advice you need to make the best decisions for your portfolio.

5. Trying to Save Money With a DIY Property

Finally, if you are purchasing a property individually, you might be tempted to try to be your own property manager to save some money. Do not do this. The day-to-day expenses and time responsibilities of managing an investment property will catch up with you, and you will not have the time or energy to continue to invest in more properties and create more income streams for yourself. Turnkey properties may come with monthly fees, but the time and freedom you get with them more than make up for those fees.

Avoid these five mistakes that everyone makes while investing in a property, and you will love the results for your portfolio.