3 Best Practices for Real Estate Investment
Investing In Real Estate: AchieveYour Real Estate Goals
With mortgage rates so low, many investors choose to invest in real estate, as opposed to the stock market. In addition, real estate is a prime investment for novice investors, as it is more tangible and understandable than stocks and the index. According to Bankrate's annual investment research, 27% of Americans with money to invest would choose to invest in real estate over any other investment. Because real estate is becoming a popular commodity, especially among investors, here are three tips for investing in real estate:
3 Essential Elements to Real Estate Investment
1. Quantity over Quality = A Fair Cash-on-Cash Return
When investing, you are probably going to be using money from CD accounts, stocks, or bonds, which means that you are no longer going to be getting the 4 – 6 percent return. The goal in real estate investment is getting a higher return than what you would have received, had you left the money as liquid financial assets.
Many investors, especially those newer to the game, come into the market looking for prize homes. This can be an extremely risky investment, as finding a renter may be difficult and you need to be prepared for an unforeseen market turn. With that in mind, investing in the average homes that are cash-flow positive, which may not be as fancy as those prized properties, are ideal. View Zillows' "A Tale of Two Townhomes" for more information.
2. Do Your Due Diligence
It's common knowledge that investment comes with an involved risk. Yet, real estate developments, parcel/land, Tenant in Common, and fixer uppers have a much higher risk than the previously mentioned cash-flow positive property. With TV shows like "Flipping Boston" or "Flip This House" on A&E, many people want to purchase a foreclosure fixer upper, with a low cost, flip it, and sell it later for a large profit. While this can be a lucrative investment, it takes practice and due diligence (and possibly luck). Even for those looking to purchase the cash-flow investment properties, as mentioned above, doing your homework (viewing reports, analyzing, crunching numbers, etc) is required to make the best real estate investment decisions.
3. Time is Money
When purchasing investment property, you also need to consider the amount of time you have to put into managing the property. Rental properties in vacation destinations and college rentals constantly have tenants coming and going. If you do not have the time to put into the property, you need to make sure that you are investing in the right type of real estate. Find a calm neighborhood or area, further away from colleges, to attract families or individuals that will rent and stay for as long as possible. While there will be issues, having a long term relationship with your tenants will help in the long run, as they usually require less time and management.
Let Us Help You Achieve Your Real Estate Goals
Real estate can be a risky investment, especially for individuals new to the real estate market and industry. As real estate professionals, we are area experts that are privy to real estate trends, as well as market and industry news. Contact us today to learn more about the services we can provide.