There are several reasons why one may consider turning to investing in real estate. Paltry bond returns, slighting bank interest rates and frenzied stock market fits are some of those. In such cases, resorting to rental real estate and generate supplementary income may seem like a good idea.
Real Estate Investment, though, is not everyone’s cup of tea. Harsh as it may seem, these six tips come handy in discovering whether or not investing in real estate will help create a sound investment portfolio for a particular investor.
1.) Goal Assessment
Days of purchasing property only to flip it to earn a quick buck are long gone. Alternatively, in current-day market scenario, rental real estate is a better bet for steady and continuous income. It does take a little perseverance, but it sure pays ultimately.
- An investor must be prepared for intensive research to search for an attractive property with adequate rental returns.
- The next step would be to carry out a lot of number crunching to figure out whether buying a particular property will be financially feasible.
- Next follows property management, which may include renovating the place or fixing some or several issues such as those related to plumbing, cleaning or painting.
2.) Getting Familiar with the Neighborhood
It is a must to assess several factors about the shortlisted property such as the zoning laws, the view, proximity to public transport, infrastructural plans in the offing within the premises or surrounding area and the overall health of the rental market.
3.) Preferring Local Investment
It is the easiest to get familiar with one’s own neighborhood, and watching over in case the house is empty. The extent of difficulty of doing a landlord’s job is directly proportional to the distance from the rental property. Hiring a property manager is an option, but won’t that eat away a sizeable chunk of the profit?
4.) The Best Bet
One bedroom houses are the latest sweet spot in this market, due to a growing number of young singles, retired widows or widowers, divorced middle-agers, etc. all looking for a smaller unit. It offers them and the landlord the best value for money, while being easy to manage.
5.) Paying A Good Price
Real estate investment expert, Jeff Adams, says that if an investor pays 12 times the annual rent total for buying a property, then it’s a good deal. In today’s real estate market, investors are doing better; purchasing properties for 9 or 10 times the yearly rent.
A wise investor does his/her homework well, calculates in advance the monthly rental earnings and never pays more than the total monthly expenditure.
6.) Keeping Cash Reserve Handy for Unexpected Expenses
All homeowners know how important it is to keep some reserve cash at hand for several things that could go amiss. It is important to count in the possibility of the property being unoccupied for certain periods during the year.
All said and done, is prudent to consider all expected and unexpected financial and personal factors in order to decide whether investing in a real estate project is worth the effort and the money spent.
