The perfect real estate investment is one that has high returns and very low risks. This is only possible if you know how to make smart choices. Luckily, if you know the three things that indicate a great real estate investment, you are a step closer to achieving that.
Firstly, you need to find a good return. To invest in the illiquid asset that is real estate, you will have to take money out of your liquid assets. What you should look for is to get the same or similar rate of return. In other words, you are looking for a property with potential cash flow, rather than a money pit.
Also, make sure that your investment isn’t too risky. Although there is always a risk in real estate, some options are higher risk than others. If at all possible, avoid tenant-in-common options, fixer uppers, real estate development and private real estate funds. Indeed, with these options, so much can go wrong that you are likely to never see a return on your investment. Instead, look for good properties and title them to yourself. Naturally, this means you need to take the time to do research and analysis, and you must exert due diligence. Stay away from properties that have to managed intensively or are otherwise time-consuming. If at all possible, avoid properties in bad areas, college homes and vacation rentals for instance. You should look for properties that people with good credit profiles will rent for extended periods. You will only be able to achieve this, however, if you also commit to being a really good and respectful landlord. There will always be issues with rental properties, but so long as you resolve them quickly, you should have a good investment.
If you don’t have a lot of money to put down, you will find that it is easier to invest in rental properties if you are younger. Banks will generally want at least a 20% deposit before giving you a mortgage. This can be a significant amount, particularly if the property needs repairs as well. However, banks tend to be a bit nicer to younger people. There is a lot more to real estate investing than this. One of the things you will need to work out is which property to invest in at all. If you want to find a property, however, you need to have the time to do a lot of research and you must analyze your options. One of the things you will also have to do is find a realtor that represents you properly. Together, you can start looking for properties. You will then need to look into what it means to be a good landlord, something that will take a considerable amount of time to learn. However, do always remember that it is absolutely worth spending this time.