Missouri has homes that are below the national median home value average, which attracts investors to the area. If you’re new to investing in real estate, three of the most important aspects are picking a niche, setting aside enough money for unexpected costs and understanding the laws.
Choose a type of property
When you’re new to real estate investing, you may want to focus on one type of property first. Each type of property has a learning curve. Thus, you might find it best to master investing in one niche first. The different types of real estate include residential, commercial, industrial, retail and mixed use. Most people start with residential properties because they’re cheaper and the industry is easier to understand.
Estimate the full costs
A common mistake beginners make is failing to accurately estimate the full costs of a property. There are taxes and repairs to consider. Estimating how much to set aside for repairs is challenging. Some property managers set aside half of the annual rent to handle the estimated maintenance costs for that year. Others use the square footage rule and set aside $1 per square footage of the property for each year.
Practice risk management
An understanding of the state’s real estate law is essential for investors. Making a mistake could put you at risk of lawsuits and fines. You might want to stay on top of the state and local real estate laws and set aside money to cover potential litigation costs. Even when you follow the law, someone could sue you. It may require a court case to prove your innocence.
Finding the right property to invest in is only a small aspect of successful real estate investing. Investors typically overestimate their costs to be on the safe side. They anticipate emergency repairs and unexpected litigation.