As a growing number of individuals discover the financial perks of real estate investments, it can become hard to find the game plan that will work for you. What works for one investor may not go well another. In our latest article, we will ask questions that can help you determine your investment strategy so you can develop a strong portfolio of properties in Chicago.
Question 1: What are your long and short-term financial goals?
Before you begin investing, you need to have an understanding of what you want to get out of it. As with many goal or plans, it is a good idea to start with the end in mind and determine the steps that will get you there. What types of properties will get you there?
Question 2: Is your portfolio mixed?
It is terrific to find a niche and run with it. Some people succeed with rentals, while others find their prosperity flipping mobile homes. While you might have one area of focus, the leading investors will always take into account some diversification in their portfolio. In terms of real estate, a well-balanced portfolio can include single family rentals, commercial property, and even land.
Question 3: Just how much risk are you content with?
As they say, don’t spend anything you aren’t comfortable losing. The question is, how much are you ready to risk? You might find a value-add apartment building. You have the vision and if done correctly, it could turn into a cash cow. However, with a fixer-upper, there could be a list of repairs much longer than you had imagined. Never put yourself in a spot where losing the investment would destroy you monetarily.
Question 4: How hands-on do you want to be?
Most real estate takes sweat. A bigger building might require you to remain onsite a good amount of the time. This sort investment can turn into a full-time job, and your profits should reflect that. On the other hand, if you are trying to find something low-maintenance and more or less “hands-off”, investing in land may be the right option for you.
Question 5: How much can you afford?
When buying Chicago real estate, there are a bunch of numbers to run first. What will you be taking in each month? Even better, consider what a typical year could bring. There might be repair work, vacancies, and more. You may not be producing your full estimated rent each month of the year. Knowing this, how much can you afford to cover the property each month? If you are obtaining a loan, the rates could be higher than with a standard mortgage.
Question 6: Are you open to having partners?
There are benefits and drawbacks to collaborating. You will have someone to share the workload, but you will also have someone sharing the gains. The best way to find a good partner is to find someone who masters areas in which you might flop. Maybe they are great at crunching numbers, while you are great on the phone finalizing deals. The greatest partners might think a bit differently than you do, but they will bring more to the table than you would have had on your own.
Question 7: What types of property are you thinking about?
Why do you like? Yes, it should be profitable, but you also need to love what you are doing to be a success. Maybe you have an apartment building but the improvements and tenant turnover is driving you insane. A property similar to this could be more trouble than it’s worth. And yes, you want to run the numbers and choose something that will be financially rewarding. But you should also choose something you love. It will help you to take more pride in the investment, helping you to better enjoy the system overall.
Question 8: Have you considered how this will effect your taxes?
Never pay for Chicago real estate without discussing the purchase with your accountant. Lots of folks dive into a property purchase, only to end up buried in taxes and costs a year down the road. Take a look at the income, expenses and cap rate. Magnify your maintenance costs and plan appropriately.
Question 9: Are you using the investment proceeds for a specific purpose?
Some people will use real estate to accomplish a loftier goal like college or a new business project. If you are using your investments profits towards school lets say, you might choose financial commitments with less risk. Some options to think about would be land or REIT’s. Thoroughly define the returns you wish to achieve, so you can create an investment plan to help get you there.
Question 10: Do you have a powerful crew?
Top investors don’t execute by themselves. They surround themselves with a team of men and women who are the best in their fields. Agents, wholesalers, accountants, attorneys and construction professionals. Before you purchase investment land and buildings in Chicago ask yourself if you have a strong team in place to help you realize your investment strategy.