Achieve true financial freedom with smart investments and hard work

If a market is oversaturated with rentals, it becomes a renters’ market – that is, rents will decrease and owners must offer incentives to entice tenants. Buying property in areas with few apartments available and many renters leads to two effects that are good for you: renters will stay longer, because looking for an apartment becomes more difficult, and you can charge more for rent.

Nearly as important as the supply and demand in your desired area is the property’s location within that area. Is it in a walkable neighborhood enticing to young adults? Is it near parks or ponds that families would enjoy? Top school districts, safe neighborhoods and nearby amenities – all of these things allow you to ask for higher rent.

It’s vital to look for areas with low property taxes – they’ll be a major contributor to your expenses. You should also look for low homeowner association (HOA) fees and areas with lower expenses for the permits you will need. And while it can be tempting to look for bargain-basement “fixer uppers,” unless you’re an experienced “flipper,” these can be more hassle than they’re worth.

Properties that will increase in value over time will give your portfolio stability and create more profit for you. This is called “appreciation,” and it can be hard to predict. Look for areas with growing populations, increasing investor interest and gentrification. Avoid areas with damaging weather, decreasing populations, school closures and job loss. And always be prepared for a recession.

Learning how to value properties is a massive asset in the real estate investment world. It allows you to buy below market value, negotiate better and decrease the cost of an outside party. If real estate agents and brokers can do it, you can do it too.

Warren Buffett said, “Accounting is the language of business,” and the world’s most successful investor definitely knows what he’s talking about. Reading financial statements is an essential skill for any businessperson learning how to scale a real estate business.

Operating expenses will be your biggest cost on any rental property – up to 80% of your gross income. Taxes, insurance and property maintenance are the most obvious, but don’t forget to budget for closing costs, property management fees and future vacancies.

This is the key to stability in an unstable market. When you diversify your portfolio by investing in different types of property, such as commercial and industrial or even in a real estate investment trust, you can minimize the negative effects of recessions and downturns.