Get contracting experience by working on your own home

Instead of improving your home in the usual “do it yourself” manner, consider hiring carpenters, plumbers, and handymen to do work.  Solicit bids and figure out which companies and firms do the cheapest and best work.  Having construction experience and knowledge certainly helps, but it is just as important that you can efficiently utilize contractors; nobody can complete every job that is required in property improvement.  If you can be a useful, all-around general purpose contractor then you will not only improve your employment opportunities, but you will have the skill necessary to successfully perform property investment.  (A small note here:  This barrier to entry is exactly what makes property investment lucrative)

Build a relationship with a bank

To properly improve a property, you will need to be able to secure construction financing.  Being able to get a mortgage on a property will not provide enough capital to improve the value of the property.  As such, you will have to have bank contacts that are willing to give you an investment property loan to finance your construction work.  It can be difficult to secure this type of financing unless you have general contracting experience.

Start small

To invest in property, ideally you want to stick to property that is being sold in your geographic area.  You will generally have a better idea of the sort of architecture and taste common to the area, and so will have an advantage against national property management companies and investors.  Scour the newspapers for foreclosure sales and tax deed sales.  The ideal property to invest in is one that is being sold at a discount compared to other homes in the area, but that also can be improved at a reasonable price.  This is where your contracting and construction experience will come in handy.  Most foreclosed properties are sold at a deep discount, but most investors will be unaware of the true cost of improving it to a saleable condition.  If you’re aware of these costs and can make intelligent assessments of the cost associated with repairs, you have a gigantic advantage against other investors, and even property investment companies.

Consider your income streams

You will eventually have to pay down the mortgages and construction loans associated with residential property investment.  This can be done either through the outright sale of a property, or otherwise through renting it out.  Unfortunately, the only way to know for sure which option is more lucrative is to do an analysis of your local market.  In some cities, rents can be enough to pay down loans and collect monster profits, while in other cities it will be necessary to sell the property to make any profit.

Keep close track of your accounting

The most important part of property investment is keeping track of costs.  Many people who engage in property investment believe they are making a profit until they do a comprehensive analysis of the costs incurred over the life of the investment.  There are dozens or even hundreds of small costs that will occur over the life of a property investment, and the difference between successful and failure is often simply whether or not these costs are accounted for.  Property investment analysis is critical – by keeping track of your costs, you will also better learn how to reduce them. If you want to learn more about this market, consider attending a property investment seminar. These can be invaluable in terms of giving you background information, and networking in your local area.

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