Watch out for these classic mistakes, and invest smarter and more profitably…
- Investing At The Top Of Weak Boom-Bust Markets
Some analysts believe that overall the US property market is under-building, has great underlying fundamentals, and plenty of room to grow. There is a lot of data and charts to support that. However, there are also markets on the fringes which boomed and crashed horribly in 2008. They may now be priced well above those levels. Perhaps still riding only on speculation and investors instead of local residents. Watch for those where the local population doesn’t support that much inventory and where it has become too unaffordable for those who would actually want to live in those units.
- Buying On Thin Yields & Profit Margins
It’s no secret that demand for property investments and the safety it provides has led to compressing yields over the last two years. Sustainable yields are good. Yet, once they get too low, investors can be at risk of falling into the red. If you are only expecting 4% gross yields, escalating costs, a spike in vacancy rates, or higher tax bills can wipe out the gains and positive cash flow. This is even worse if you are in a rent-controlled state where you can’t make it up by increasing rents in line with real inflation.
- Investing With Companies Who Don’t Prioritize Customer Service
This is true with any type of investment. Sooner or later, poor customer service will catch up with them, and then show up in your returns and asset values. It takes intentionally prioritizing customer service to keep it good. This will snowball in the right direction over time, and insulate your business and properties from external factors.
- Not Being Alert To Major Changes In Local Laws
Regulation and legislation seem to be the biggest risk to real estate investors today. Rogue lawmakers and politicians are proving they can change the dynamics of markets overnight with new rules. Know what those in power are trying to push through and how investor-friendly or anti-business they are. Look out for new rules and what they might mean for you. California and New York are two examples of the most extreme jurisdictions with a reputation for very aggressive legislation. Among the factors to watch this year are rent control, new taxes on landlords, utilities, tenant screening rules, and bans on certain categories of employment, like freelancers and independent contractors.
- Not Making Moves While Others Are On The Sidelines
Don’t follow the herd. There are going to be many who jump on the media’s emotional roller coaster this year and become paralyzed until after the election. They are going to miss out on the best acquisition opportunities. Once the herd is in stampede mode after November, a spike in demand could see many paying more for the same properties they could have purchased cheaper a month before. Take the eagle eye view. Look at the big picture and what’s over the horizon and for the timeline you expect to hold properties. Chances are it looks a lot clearer up there, once you break through the low lying clouds.
ABOUT THE AUTHOR
Bill Zahller is the Managing Partner of Park Capital Partners, LLC and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Partners, LLC in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalPartnersLLC.com for more information.