The common strategy is to buy a profit producing property. These may be single-family homes, apartment buildings, and office and retail buildings with the intention to rent the property or units. The investor will benefit from the cash flow.
Things to Consider:
First, consider your experience. What do you have to offer? Do you have building experience? Have you ever renovated a home?
Are you ready for a part time job? Fixing up your new investment can take time and money. Hiring a professional contractor may eat up your bottom line.
Are you looking to rent your investment? Can you play the role of a landlord? This may be very difficult indeed. You may want to consider a professional management company for this.
Contact a professional real estate consultant for advice in finding investment properties. They should perform comparative market analysis techniques to determine your target properties potential values.
Factors that Affect Value:
Location – Location will always be the single most important factor in real estate.
Local Economy – How well is the local market. Does this area suffer or thrive?
School Districts – Is the school district demanding or near the bottom of the chain. Parents research the best areas to live so their children may attend great schools. Stay away from areas with poor ratings.
Commercial – How busy is the location. What’s the traffic count. Will the business and value grow or fall?
How to decide if an investment is affordable.
Add up all cost for repairs, updates, renovations, taxes and insurance. Inspect the home. Does it have good bones or will it take a fortune to fix?
Develop an exit plan. If your investment ends up being a never ending hole that seems to absorb all your profits because of problem after problem, you may need to cut your losses and walk away
Common Investment Mistakes:
Paying too Much
Do your research. Buy below market value.
Rent without a background or Credit Check
Make sure your new tenant isn't wanted in three states. Check out their employment and credit history. Can they afford the home?
Starting too Big
Don’t expect to be Donald Trump over night. Start small until you get your feet wet. Only move on to more if you’ve make a profit on the last. Don’t go overboard with upgrades and improvements.
Make sure you've done your home work on the potential partner. Some properties may only be purchased with a partnership. Be cautious. What’s their experience?
By: Tom Smith
Associate Broker, Century 21 Adventure Redwood