Now that it’s officially 2022, it’s time to set yourself up for real estate success with the upcoming year ahead. So, what do you have to do to make this your best year yet? And how can you ensure you won’t be making any of the same mistakes?
It’s no secret that passive investing can generate a substantial amount of income for you. But you’ll need investment properties that guarantee valuable cash flow. Have you already set your investing goals for the upcoming year? Have you taken a long hard look at your finances? The real estate investing process requires taking initiative and knowing how to make smart buying choices.
All real estate investors can benefit from accomplishing specific high-priority tasks at the beginning of every year. It’s important that you close out the previous tax year and start off 2022 on a high note. Here are some of the top things real estate investors need to do at the beginning of the year.
1. Make sure you don’t have outstanding property taxes and invoices from the last year.
Most states bill property taxes around the end of the year. As real estate investors, it’s best to avoid any delinquencies and pay taxes on time. Some states even allow you to make both payments before the new year starts. If you pay your taxes early, you’ll have a higher return sooner rather than later. This is a great way to guarantee positive cash flow earlier in the year. This is a consideration you may want to take into account as a landlord.
It’s also important that you don’t have any outstanding balances for repair costs or renovations at the beginning of the new year. If you wait until January to pay them, then the expenses won’t qualify for tax deductions until the following filing season. This brings us to our next high-priority task.
2. Gather your tax documentation and speak to a financial advisor.
It’s important that you keep records of any expenses you’ve made for your rental properties within the last year. As a property owner, you’ll have to pay for a long list of expenses on your rentals. That’s just how the real estate business works. As we mentioned in the previous section, you’ll be responsible for a lot of expenses, such as property taxes, insurance, mortgage interest, operating expenses, depreciation, and repair costs. But did you know that these could qualify as tax deductions?
In the United States, it’s common to write off anything related to your real estate investment business. Real estate investors in some areas, for example, can deduct their expenses, even including costs for legal services, office space, advertising, and travel expenses. Investors should gather their tax documentation at the beginning of the year. It would be best to seek out financial services for asset management. Take a look at your investor profile and your profit margins. Try to predict how changes in the real estate market can affect your property value and rental income in the long run.
3. Set realistic investment goals for the new year.
In the past year, the real estate industry was a seller’s market. Homeowners were looking to build wealth by selling their residential properties. Meanwhile, commercial properties weren’t as popular due to remote work. Home prices soared, and many real estate investors saw it as the perfect opportunity to make a good investment.
If you want to build wealth through real estate investing, you’ll need to set realistic goals. Maybe you’re looking to get to know and make friends with more real estate agents or investors. Or perhaps you’re looking to diversify your investment properties in 2022. Are you hoping to find new property management or widen your professional network? Do you plan to add new rental properties to your portfolio? Are you looking to flip a residential property or learn more about the real estate market in general?
Regardless of what you’re looking to accomplish, you need to set goals that are realistic. Monitor the housing market and gain insights to determine your next moves.
4. Lay out a strategic plan to accomplish your real estate goals.
The key to accomplishing your investment goals is to set deadlines. You can write them down based on your goals for the first, second, third, and fourth quarters of the year. Be specific about how much you plan to save, invest, or earn. The most successful entrepreneurs never go in blind. They come up with a proper plan for success with a detailed investment strategy.
Let’s say you’ve come up with your goals for the year. To find out whether you’re making smart investment decisions, you should lay out all the steps necessary to accomplish that goal. For example, maybe you’re ready to let go of one of your rental properties, but it isn’t quite up to par. So, your goal for the year is to flip it to maximize the resale value. To accomplish this, you will need to set deadlines for the renovation, factor in any unexpected expenses, come up with marketing strategies, and figure out when the property should be ready to list. The more details, the better.
5. Look for new investment opportunities.
To maximize great opportunities, it’s best to diversify your portfolio within the local market. You’ll be able to find a good investment on sites like Zillow, Trulia, or Auction.
If you want a passive investment, don’t just go for the first deal you see. Consider looking for off-market deals in commercial real estate. Or check single-family homes in top neighborhoods, and look at the median home value for the area. Factor in affordability to maximize your return, and keep in mind that renters will be searching for proximity to good schools, parks, and restaurants. To ensure a good investment, lock in a property in a coveted neighborhood and keep checking those interest rates to make sure you’re buying at exactly the right time.
If you want to navigate the upcoming year successfully, then it’s best to be prepared. Get your taxes straight and gather any documentation for your financial advisor. Then, start jotting down any investment goals and lay out detailed plans for each goal. Look for new opportunities to invest so that you can generate steady cash flow and make 2022 your best fiscal year yet!
About the Author:
Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: good egg investments
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.