Investing in real estate carries a certain amount of risk; and just like any investment that carries a risk, there are also equitable returns to go with it. There are also time constraints that you will have to consider when making an investment so big. Here are a few things that you should keep in mind before purchasing a piece of investment real estate.
It is very difficult to know or calculate the exact returns that you will get out of an immovable and illiquid asset like real estate as you cannot sell it off if doesn’t seem to work for you overnight. Pricy property will seem like a good idea, but rotating tenants and getting fair and timely returns will be a problem. Make sure the real estate you purchase finds a good number of tenants, it will become cash flow positive.
Location is what determines everything from rent, taxes and type of tenants. Bus stops, schools, supermarkets, colleges and offices are among the most important factors that determine value of real estate, so make sure you have these in mind when purchasing as well as when pitching the house to tenants.
Management of real estate, especially if you live far from it can be a problem, so choosing one that does not require too much time and effort managing will do you good in the long run.
Real estate that has a house sitting on it that is in good shape and can be put on the rental market right away are the ones you should look out for. Restoration can be very expensive and if you are looking for the quickest return on investment, damaged or old structures may not be for you.