So you have decided to jump onto the investment property bandwagon, right? It is definitely not a bad idea and will give you returns – as long as you remember that investing in property is NOT a get-rich-quick scheme. You are making a medium or long-term investment and to get the best returns on that investment you need to do a lot of soul searching and homework. Here are a few pointers to consider.
Type of Investment Property
There are many strategies you can use to earn a good income from investment properties. One of these is ‘flipping’ property. This means that you buy a house, renovate it quickly and sell it for a profit. Another strategy is to buy a property for many years and sell it once the price has appreciated quite a bit. A third one is to invest in a single-family home or apartment building or even office space and rent it out.
How to Decide Upon Strategy
There are many things to consider when buying an investment property. First and foremost is the strategy you intend to pursue. Keep in mind that you need to be ready to put time, money, and effort in order to get the best returns. So:
- If you want to ‘flip’ property you need to buy a house well under market value. You also need to calculate your costs in buying the house and renovating it as well as the profit you want to make. Plus, you definitely need to make sure you have the skills it takes to renovate a house or you will end up spending even more on contractors.
Commercial Real Estate Cash Flow Funding System
- If you plan to buy a property with the eventual intention of selling it once the market has appreciated it, you need to do plenty of research. You will have to look at the location, see whether it is subject to cyclical appreciations and depreciation and look into plans for the neighborhood in the future and how those are going to affect rates all around including property taxes that might conceivably eat into the bottom line
- If it is a rental property you are interested in, your first consideration must be whether you are cut out to be a landlord. A well-behaved tenant is an exception, not the rule. Also, the rents you charge should be able to cover your mortgage, insurance, and any other unforeseen expenses.
Having an Exit Strategy
It is not just important to know when to enter and how to enter but when to exit. Failing to have an exit strategy can completely blow apart your otherwise carefully planned investment. You need to research the market and plan for when you will exit to maximize your profits. The longer you can hold on to a property the more profitable it may turn out to be.
Keep in mind that investment property is unlike other investments in that you cannot liquidate whenever you need funds. Plan well and carefully so that it becomes a solid investment and can provide for your financial future.