The 3 Best and Worst Moves a New Investor Can Make
All investors in Kona Hawaii houses for sale were newbies at one point or another. We all know what it’s like. Whether we leapt into investing as a get rich quick scheme, diligently pursued investing as a career, or were simply seeking a low maintenance source of passive income, we have all been faced with the overwhelming sense that the knowledge, skills, and details of real estate investing are simply beyond us.
Those of us who remain in the field can confidently say that those doubts are part and parcel of the job. You shouldn’t allow them to dictate the course of your career. A decision made out of fear is an inherent obstacle to growth! To reassure and motivate discouraged novices, we have created a list of the the three best and worst moves you can make as a new investor in Kona Hawaii houses for sale.
The Best
Invest With Reliable Cash Flow
In the initial stages of investment in Kona Hawaii houses for sale, real estate is cash-intensive. Your 20% down payment on your mortgage will soon be followed by monthly mortgage payments, initial repairs, and the expenses associated with marketing your property and attracting good tenants. Needless to say, it is absolutely critical to begin investing only at a time when your monthly cash flow is both ample and reliable. Using excess cash flow to invest is a far greater long-term financial strategy than luxuries of short-term gratification.
Be advised, though, that regular cash flow is not enough to support a successful real estate venture. Unanticipated repairs, damage, and vacancies can be financially devastating if you lack sufficient cash reserves. If your cash flow is heavy but your reserves are light, consider waiting to invest in Kona Hawaii houses for sale until you have funneled some of your cash flow into savings.
Seek a Mentor
A real estate investment mentor is an invaluable tool for success. While selecting and bonding with the right mentor can take time and research, it is typically well worth the effort. You want to seek a mentor with experience in your given field. But it is also important to seek mentors with similar cash flows, life experience, and personal attributes. How you successfully run your unique business is contingent not just upon the methods necessary in your field, but also upon what will compliment your individual personality, preferences, and financial situation. An individual that is, or used to be, similar to you in these respects will be able to offer better advice on what to do and not do as you begin investing.
Mentors can also help you avoid curveballs unique to your location. States diverge in their treatment of tenants’ rights, building codes, and escrow laws. Sometimes it’s easier to glean your best course of action in these areas through face-to-face conversation than through an attempt at navigating legal jargon.
Diversify Your Assets
Investing in real estate is an excellent way to diversify your assets. Diversification is essential. It prevents you from suffering major loss in the event of a collapse in one financial sector. Investing all of your funds in stocks could be devastating should the stock market falter. If you invest some of that money in real estate instead, you can cut your losses, diversify your source of income, and reap a greater total net return on your investments.
You can diversify not just in terms of the types of your assets, but also in terms of location. That way, should a local real estate market suffer from a popping bubble, your other assets will remain unaffected. Just be aware that holding multiple properties in different neighborhoods will require a broad understanding of market dynamics and, if you don’t hire a property manager, a lot of running around and logistical maneuvering.
The Worst
Investing in a Single Asset Class
This piece of advice may seem obvious in light of our recommendation that you diversify your assets. If you hold a single asset, or a single class of assets (i.e. multiple, similar properties in the same area), it may be that a substantial portion of your net worth is concentrated in that asset class. If said asset class is a volatile one, you have effectively left your net worth highly vulnerable to the fluctuations of a single market. And there are several things that can influence a local market. These include factors from changes in tourism and business relocation to social upheaval and changing tax laws.
Failing to Carefully Calculate Your Figures
Again, this piece of advice seems obvious. But a surprising number of investors make the mistake of rounding and “guestimating” their financial figures only to suffer critical losses shortly thereafter. It is absolutely essential to obtain a thorough, accurate assessment of your income and projected expenses. How much do you earn at your job? How much income do you expect to generate in rental income? What is your monthly mortgage? What are your monthly personal expenditures? Have you accounted for unexpected expenses, taxes, appreciation, vacancy rates, cost of capital, and other factors that affect profits? It’s a tedious process, but thorough and conservative estimates of your income may just save you from wasting energy on a cash drain.
Treating Real Estate Investment As An Experiment
Investing in Kona Hawaii houses for sale requires educating yourself on local markets, carefully calculating your figures, and evaluating deals rationally. It’s not a field for impulsive individuals wanting to “see what happens and give it a shot.” Success in real estate requires more than crunching numbers. It requires forethought, the careful crafting of goals and strategies. How are you going to diversify your portfolio? How much money do you want to make? Will you manage the properties yourself? What kind of lifestyle do you want to lead? Will your financial activities and goals allow you to create it? Tackling real estate with impulsivity instead of deliberateness could land you in over your head, both in terms of finances and business obligations, in a very short period of time.