The stock market isn’t the only place that people invest their money. Real estate is one of the most common investments around the world, and for good reason. Real estate investments are secured by the property that is being purchased. Even if property values fall, the investment will never fall to zero.
Moreover, real estate costs tend to rise. In fact, the values of existing homes have risen by approximately 5.4% per year historically. With extensive experience in helping investors find great real estate opportunities, I’ve learned the ins and outs of the industry. With that said, here are a few tips that will help make your real estate investment venture a success.
Tip #1: Get Your Budget Together First
Buying an investment property is a bit different from buying a home. My experience is that clients will generally finance the majority of the cost. But financing an investment property is different than financing a home. There is no mortgage insurance available. Therefore, lenders will usually require a minimum down payment of 20%. It’s important to consider this when coming up with the budget for your investment property.
Tip #2: Consider The Investment Vehicle
As with stock market investments, there are several different vehicles to consider when investing in real estate. Rental properties, agricultural land, raw land in residential areas, apartment buildings and strip malls are just a few options.
Each investment vehicle will come with a risk and reward profile that is unique to that type of investment. Take the time to do your research and get an understanding of these risk and reward profiles before making a real estate investment.
Tip #3: Consider The Tenants That Your Property Will Attract
If you invest in rental homes, apartments, or strip malls, your reputation can make all the difference in your success. Considering this, it’s important to take the time to consider the types of tenants that the properties you invest in will attract.
For example, a $60,000 home in a bad neighborhood may attract needy tenants that are consistently late on rent. A $200,000 home in a nice neighborhood is likely to attract a more professional renter with a stronger payment history. The same goes for apartments, strip malls, hotels, and other tenant-based investments.
Tip #4: Work With The Right Agent
Real estate investing is a specialty area. If you’re not experienced, you may pay more than you should for a property, making the investment dollars that you sink into it hard to recuperate. Working with a real estate agent that has a history in the investment space can help to ensure that you get the right investment property for the right price.
Tip #5: Share The Risk
If you find good deals with a strong potential return, you won’t have to take the risk on by yourself. There are tons of investors out there that are looking for joint ventures in the real estate space. In fact, a simple search on Google will yield several sites that are dedicated to helping investors mint these relationships. If you don’t want to take on all of the risk involved in a real estate investment, consider sharing the risk with the right partner.
Real estate investment can be a highly lucrative play. I’ve assisted several investors in making good decisions in the space and have had success of my own as a real estate investor. Through this experience, I’ve found that those who follow the tips above tend to achieve the highest levels of success.