When done right, real estate is generally an excellent investment, especially if you're planning your investment strategy over the long term. I've been working with investors for a long time, and the formula for success is pretty simple: 

1. Buy at the right price. 
2. Renovate at the right price. 
3. Sell/lease at the right price.

Obvious, right? Maybe so, but you might be surprised at how difficult it can be to pull off. Here are two of the most common investments I work with, and the ins and outs of each. 

Rehabbing properties for sale

You've seen it on TV: Someone buys a fixer-upper, renovates it and sells it for a tidy profit — at least, that's the goal. This is the kind of investor I work with most often. This investor is looking for well-priced properties that need some TLC. Sometimes these are foreclosures, but often they're estate sales.

If done well, a rehab will not only net you a profit, it could have some positive impact. First, the property's improved value may positively influence the values of the homes around it. Second, these properties often turn into homes for buyers who couldn't otherwise have afforded a home of that quality. Nothing wrong with doing a little good when you can. 

Here are some things that can trip up investors: 

• Paying too much for the property.

• Underestimating the cost of renovations.

• Finding something unexpected during renovations.

• Overestimating the market value of the home after renovations are complete.

• Underestimating the amount of time it will take to sell the house. This is problematic especially for buyers who are financing their initial investment and have to make mortgage payments until the house sells. 

Investing in rental properties

Whether or not you want to be a landlord, investing in rental properties is a solid way to get into real estate investing. Again, it's about making the formula work: You have to keep the expenses associated with owning the property in line. 

Plan on being hands-on if you decide to manage your own property. The more properties you own, the more time management will take. Remember, this includes everything from screening tenants and collecting rent to making repairs and marketing the property. For a percentage of your rent, a property management company can take care of all of this for you, allowing you some distance from the investment. 

The list of things that cause these investors to stumble is similar to the one above: 

• Paying too much for the property.

• Underestimating the cost of renovations or maintenance. 

• Overestimating the rent they can get for the property.

• Underestimating the time and expense required to find quality, long-term tenants. 

• Having trouble with a tenant and winding up with damage to the property or unpaid rent. Again, this is especially troublesome for non-cash investors.

Avoiding costly errors

As you can probably see, when you decide to invest in properties directly (as opposed to investing in a trust, which I'll talk about in a future blog post), understanding the market where you're investing is critical to your success. That's why it's important to partner early in the process with a real estate agent who has experience with investment properties. Your Realtor can: 

• Help you negotiate a fair purchase price at your initial investment. This is especially true when you're working with foreclosures or estates. In the case of the foreclosure, you're working with an unhappy bank. When you're buying from an estate, you're often faced with an emotional family. In both cases, an experienced negotiator can better handle these interactions. In addition, a Realtor can give you a reality check when it's looking like you're going to have to pay too much to get the property. 

• Connect you to home improvement professionals so you can accurately estimate costs.

• Help you determine the sale price you need to get the profit you want. 

• Advise you about the rental market and which neighborhoods are fetching the best rents.

The Roanoke Valley real estate market is full of opportunities for investors. If you're ready to get started, let's get together and talk about your plans and goals. I'd love to help you start finding and buying properties! Contact me today. You can email me at rpayne@mkbrealtors.com or call me at 540-793-0442.