To find the right real estate investments for you, use the following strategies:
Compare Your Investments
When you are purchasing real estate investments with cash, it means you are taking money out of other investments. Prior to investing, your cash was most likely invested in a liquid-account, such as stocks or CDs. These accounts were paying you interest to have your money invested. When you withdrawal your funds to make a real estate investment it is important to consider the interest that you are losing to accurately calculate what type of deal you are making. You will want to find an investment property that will allow you to earn a fair cash-on-cash rate of return. Look for properties that are netting positive cash flow from the start of your investment to maximize your investment dollars.
Look for Low Risk Options
There is always risk involved with investing in real estate. Some investments are riskier than others, such as fixer uppers, Tenant-in-Common investments, development properties and land only deals. There are many situations where investors in these types of deals end up making no money at all, or worse, even losing money. The best way to invest in real estate is to find properties where you will be the fee simple owner. This means that you own the property as a whole and can use it as you see fit. Prior to purchasing, check all disclosures and have all inspections complete so you will not end up with any bad surprises after closing.
Doesn’t Need Your Time
Some investment rental properties require a lot of your time. Vacation rentals and college rentals are consistently changing tenants and require more maintenance and care than long term rentals. These types of properties are going to take a lot of your time either responding to requests or maintaining the property, or they are going to consume a lot of your potential profit by paying others to do the work. The best investment rental properties are the properties that are rented out to the same tenant for a long period of time who keeps the property nice and doesn’t require a lot of your attention. If you work to treat your tenants well, it can go a long way in keeping them satisfied in the property, thus increasing your return-on-investment.
When looking to purchase an investment property, the best ones are those that might not “wow” you from the start. They are not the properties that most people think of as great and exciting investments. They are boring, consistent pieces of property that you fully own and they make you money from the beginning.