Rental properties can make for a very lucrative investment. However, you do have to know what you are doing if you want to be successful. Rental properties in particular are still overlooked by many investors, even though they can bring in an excellent return.
You should never invest in real estate before having a few affairs in order. First, you need the capital to make an investment. Also, make sure that you get to know the real estate market and learn about the neighborhoods you are interested in.
Applying this to real estate investment, what you are looking for is not appreciation, but rather cash flow. Cash flow is what actually comes into your bank account from your rental properties after you have met your financial obligations. If you can, try to leave your cash flow alone in a bank account to create significant savings. Additionally, as your rent goes up over time, so will your cash flow. If your mortgage payments stay the same, then your cash flow will be even better. You should make sure that at least 20% of the money you get is cash flow. Spend some time using the internet to work out exactly how much your cash flow is.
You can also decide to look into a real estate investment trust (REIT). This means you need less investing capital up front, but the returns are not as high either. Working with REITs basically means you invest in other corporations. This can be anything from a construction company to a theme park. A REIT is also listed on the stock exchange and NASDAQ. A REIT, essentially, is like a mutual fund that only looks at real estate. There are a few things to think about, however. First of all, look into what the economic conditions are of the areas of key holdings. Find out how the REIT has performed in the past. Additionally, their future plans are very important. Also, you need to look into who manages the REIT and how they have performed. Last but not least, consider what the real estate market looks like and how this could affect how your REIT will perform.