The perfect real estate investment is one that has high returns and very low risks. Only if you know how to make smart choices will you be able to achieve this. Luckily, if you know the three things that indicate a great real estate investment, you are a step closer to achieving that.
Firstly, you need to find a good return. To invest in the illiquid asset that is real estate, you will have to take money out of your liquid assets. Try to make sure that the return rate you get is the same as what it was on your liquid assets. Basically, you must find good cash flow properties, not money pits.
Next, you must make sure your investment isn’t too risky. There is no such thing as risk-free real estate, but some risks are too high to take. You might want to stay away from fixer uppers, private real estate funds, tenant-in-common options and real estate development. It is highly unlikely that you will ever see a return on these options. Instead, look for good properties and title them to yourself. Of course, this takes a lot of research, analysis and due diligence. Stay away from properties that have to managed intensively or are otherwise time-consuming. Avoid short term rental properties like vacation homes or student accommodation, or properties in bad areas for instance. You should look for properties that people with good credit profiles will rent for extended periods. You will only be able to achieve this, however, if you also commit to being a really good and respectful landlord. All properties will have some sort of issue at some point, but this should be manageable so long as you deal with them quickly.
These are the things to look for in good real estate investments. The ideal property is one that doesn’t require too much maintenance or management. Unfortunately, finding these properties can be quite difficult. You need to be able to invest a lot of time in order to find these properties. You will need to take the time to analyze and research any and all options that come your way. Once you decide to start investing in real estate, you will probably want to get started straight away. Even if you have been searching the market for a long time, you should never invest in a property that you are not sure about. Unfortunately, a poor investment decision in the world of real estate can be incredibly costly and it will be hard, if not impossible, to ever see a positive return.