Residents
Owners
Starting the process of growing your real estate portfolio is a lot like starting a vehicle: You need the power to get going and momentum to keep moving. Once you leave the starting line, Newtonian physics is on your side; it’s a lot easier to keep things moving. Getting the power to overcome your initial inertia is the key! Acquiring the right information will take research—in real estate, knowledge is power.
1. Research the Area
The location you are targeting won’t necessarily dictate your success, but it will dictate the steps you take to succeed. Each location has both macro and micro-economic factors that affect each move you make. Here are some things you should evaluate:
Historical Pricing
The history of prices in the area: have rates been going up, down, or staying steady? Why? Dropping prices is not necessarily a bad thing, but you have to know about how far the market is from rock bottom.
Available Jobs
What are the job opportunities within a 30-minute drive? In the Oakland County area, people are concerned about both fuel costs and the time investment they will have to make to reach their chosen place of work. Properties within a half-hour journey from jobs are going to attract renters more easily.
The School System
The schools—both public and private—are one of the biggest factors parents with children at home consider. A robust education system is priority number one for many of them, so it should be for you, too.
Infrastructure
Plans for infrastructure improvements. When a municipality feels comfortable investing, you may have reason to as well. Pay special attention to infrastructure improvements that were voted on by residents; their confidence vouches for the area’s economic strength.2. Research the Competition
While your competition is not your “enemy,” you should still “keep them close.” One of the best ways to do this is to join a real estate investing organization. Sit down with folks, buy them a nice lunch, shoot the breeze a little longer than you usually would while at the game or on the golf course. You’ll learn a lot—and quickly.
Get to know the movers and shakers and study their moves. If you see an opportunity they seem to be missing, do not assume they’ve made a mistake. Often, they stand on the shoulders of others while making decisions—and you should, too.
For example, if no one is buying properties in an area with dirt-cheap prices, that doesn’t mean they haven’t considered it. There’s likely a good reason why not. It could be due to pollution or just a “toxic” builder. You should spend more time learning from your competition than trying to outsmart them—at least as you first get going.
3. Research the Comps
All the knowledge and strategy in the world isn’t going to beat compelling comps. People will only pay so much, and the comps will give you a dependable sketch of those limits. When in doubt, check—and double-check—your numbers against the comps. Include a little room for leeway as well, particularly if you’re entering a new market.
For instance, if you need to rent a unit for $700 to maintain an adequate profit margin, you should only move forward if the comps in the area are at least 10% higher, or $770 per month. The extra gives you a cushion to account for little things you haven’t yet learned about the area. These could include a history of low retention rates, renter or buyer default, or a perceived high frequency of natural disasters.
4. Research Local Contractors
While it’s virtually impossible to vet all contractors before investing, you should at least get an idea which Oakland County contractors you would like to work with and how much they charge.
5. Research the Profitability
When getting started, profit should be your priority. Keep in mind, this doesn’t mean you have to make a BIG profit, but a profit nonetheless. Profit is less critical for your balance sheet and more important for helping you gain momentum.
The laborious, uphill slog involved in wading through the mire of a money pit can be enough to kill your momentum before you even get started! Begin with a good experience, even if it means being more conservative than you would typically be or making a little less than you projected. Your first investment property in Novi can be either a jet pack or a brick.
6. Research Expert Property Management
Unless you have a cloning booth, you’re going to need help! A property management company in Novi gives you a team of focused, hard-working individuals who understand the importance of your budding enterprise. They can handle a wide array of tasks and responsibilities while you concentrate on building your investment portfolio.
Once you achieve success in Oakland County, duplicate it—but be careful. Take some time to objectively analyze your success to ascertain which aspects to replicate in a new area. If you find you are either too optimistic or pessimistic, reach out to a property management company to get an outside perspective.
Again, to get things rolling, knowledge is power! Once you arm yourself with information, pretty soon, your real estate investment portfolio will be in cruise control. This is why JMZ Management offers our FREE guide to "Real Estate Investing: Grow Your Portfolio!" We are here to support growing real estate investors at every stage in your portfolio's development.
