Investors are attracted to investing in real estate because the potential for profit is tremendous. However, the possibility of losing it all is always lurking in the back of investors’ minds because, as with any investment, there is risk involved.
Successful real estate investing is achievable at any point in time, despite the economic conditions. Although change is inevitable, the risk involved is manageable, as long as the investor continues to follow a few basic principles.
Whether you are a veteran investor or never owned an investment property the first thing to do is determine the strategy that one wants to use as each is unique and requires a different set of thoughts. Some examples would be; fix and flip, buy and hold, wholesale, commercial investments, land banking, etc. It is also important to understand why one wants to invest in real estate, as that will help determine the best plan of action.
The general idea with investing in real estate is to earn wealth on real estate based on the risk you are taking, while minimizing the time you need to spend attending to the property. To accomplish this, one must make smart choices upfront when buying an investment property. The goal should be to strive to get close on as many as possible:
Pays a Fair Cash-on-Cash Return
When one buys a property, one will take money from liquid financial assets – stocks, bonds, CDs – and investing it into a very illiquid asset – real estate. This money was earning a rate of return on your financial assets, such as 4 percent or 6 percent, and one should strive to earn a better cash-on-cash rate of return on your real estate. To do this, you need to pro forma your deals and buy cash flow-positive properties that earn you decent returns – not properties that have negative cash flows. For more guidance on this, Real Estate Online has experienced agents that can run these numbers based on given information from a listing. Alternatively, if you want to double-check a properties proforma data, have a look at our web-based calculators, here.
Isn’t Too Risky an Investment
All real estate is high risk. Development of real estate, land, Tenant-In-Common (TIC) investments, private real estate funds, fixer uppers, etc., all have much higher risk profiles than just buying a nice established cash flow investment property. When one wants to own real estate, consider taking fee simple title in your own name – or an entity you wholly own – to the properties you purchase. In addition, you must do the proper due diligence, analyze, test, review reports, etc., to make a lower risk real estate decision. This is one area where the agents at Real Estate Online are here to help, as we have advised many clients on proper due diligence and early analysis of properties. Have a look at our checklists to help one identify an excellent investment, here.
Doesn’t Require a Lot of Time or Managing
Some properties just require way too much time and management to make them smart investments. Examples include vacation rentals, low-quality properties in bad areas, college rentals, etc. Nice boring properties rented for long to decent credit profile tenants seem to take the least time to manage. In addition, treating tenants fairly and with respect goes a long way towards keeping good relations with them; reducing one’s hassles when an issue arises. As each hour one spends managing assets is costing the investor money and time, so it’s important to purchase real estate that doesn’t require lots of extra time to manage. This is also how the experienced agents at Real Estate online are here to help, knowing how to see properties that will take extensive time or extra resources to manage. Have a question about a property send us an email?
It’s the nice, boring, wholly owned, in good shape, cash flow-positive properties that are the best investments. They are out there for your picking; it just takes a little time and patients to find those “cash cows”.
Here at Real Estate Online, we will help you come up with an action plan for your situation as we are investors and understand that the investor must make money to succeed. We can help find deals, research properties, estimate ROI, and cash on cash returns before you put down your hard-earned money for that investment.
Call 858-736-9535 to set that appointment today and map out your action plan now!!
Also, look at the investment calculators for help analyzing the deals.
Real Estate Forum Listserv
Are you an investor that wants to get the inside scoop on up coming properties and the be able to interact with other investors to keep that edge over competitors? Than sign up for our “Real Estate Investors Forum.” This is a real estate discussion board set up to help alert and interact with others in real estate, so users will be up today and on top of current trends. This is not a newsletter, but away to actively interact with others interested in real estate. Click here to read the Real Estate Forum Listserv Etiquette & Rules.