Overall, this has been a good year economically. As the year draws to a close, data shows that in November U.S. new home purchases achieved the fastest pace in 25 years. Sales soared 17.5 percent joined by robust demand and a continued shortage of existing homes on the market. The strong uptick is another sign of the vigorous demand from would-be homebuyers amid the strengthening economy that outstripped the increase in construction of single-family houses.
With that current information in mind, reviewing your accomplishments and weakness can be done at anytime but the slower holiday season is a good time to reflect on your real Estate investments. First consider the depth of review that will best serve you. Besides having a firm grasp on constructing creative and win-win deals, your basic investing strategy has the most profound impact on your profitability. You have many options, among which are being a landlord, flipping houses, and investing in secured mortgages. Are you in the right niche going into the New Year?
Year End Financial Review
Reviewing your return on investment is at the heart of recent financial performance as well as your profitability going forward. Cash flow is another important consideration. Each investment in your portfolio should be considered and analyzed individually. Remember when doing return on investment analysis to separate the return on your own money from the return on borrowed money.
Investing 100% of your own money in a smaller property may not provide the same level of return compared to the cash flow you can generate from a larger property that you leverage using other peoples’ money. Also consider leveraged property that has increased in value and/or you have been paying down the loan for years. You may have enough equity to pull cash out for another investment. Overall, now is a good time to revisit if your best move is holding what you have, selling to generate cash, or reinvesting for future growth. A thorough analysis of individual properties helps you decide which to hold and which to sell.
A natural extension of your cash and equity position is an analysis of your investment opportunities. Whether you invest locally or in another region, now is a good time to reassess the economic and investment atmosphere for next year’s investments.
Minimizing taxes (keeping as much as possible) can be two fold. First, make sure you are tax deferring as much income as possible into retirement accounts such as your IRA or 401k. Second, consider how you are investing your retirement funds. If you are a strong believer in real estate going forward, a self-direct retirement account partially invested in real estate could be your answer.
Year End Technology Review
Technology has become integral to staying abreast of the real estate market as well as maximizing your opportunities. And just like the investing atmosphere, technology isn’t standing still. Similar to a return on investment analysis, there are multiple ways you want to review your technology. A few questions to ask yourself are if you are using the right technology? If your preferred technology is up to date? And if you are getting the most from the technology that you are using? If you are looking for what is new in technology or want to do a comparison with what you are currently using, a great place to look is here.
One type of software that is most used by investors is property management software. With that comes plenty of options that you want to occasionally review. There is a lot of information that can be input to the software. You should consider if information you are currently inputting still matches your investment strategy and analysis needs. The main purpose of the software is generating useful customized reports. Whether or not your existing reports fully meet your needs is another important consideration. Maybe you need to tweak the input, need new software, or need to tweak the output in your reports.
There will never be a time like the present to maximize your real estate investment portfolio. Please leave a comment about your thoughts about the current real estate environment and what is to come in the New Year.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.
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