There’s No “One Size Fits All” in The Real Estate Investing Game

Posted on 07. Dec, 2011 by in General

Most of you are familiar with the different types of real estate investments.    Three of the most common strategies are investing for rental income, fix and flip and wholesaling. Of course, there are many more ways to invest in real estate, some more creative than other.

Investing for rental income is considered one of the more passive, even conservative of the strategies listed above. It is a long term strategy for wealth building – it’s unlikely to provide huge gains or make you rich quickly like some of the other more creative ways to invest and often it takes several properties to create a retirement nest egg.  However, all areas of real estate investing comes with its own inherent risk, it’s up to you to mitigate that risk by conducting a thorough due diligence.

There are three things you should look for before deciding to invest. Firstly, low interest rates is always a good start, followed by low prices (that’s where negotiating skills come in handy), and thirdly – location (this can determine whether your property is easy to rent or not).

Here are 3 tips to check out before you go shopping for your rental property investment:

1.  Have a plan and know your market

If you don’t know what you are looking for, how are you going to get it?

Are you just hoping that this great investment property with massive positive cash flow is just going to jump right out at ya?  Nope, I’m sorry to tell you but it just doesn’t work this way.  You have to work and work hard at identifying what you want because if you don’t know what you want, how can anyone help you?

For starters, have you thought about the market area you are wanting to invest in?  You should be able to describe the type of home that fits your investment strategy right down from the condition, whether you require it occupied or vacant and the monthly cash flow you are looking to achieve.

Buying for cash flow is always a good investment strategy.  I know some investors will disagree and buy if the numbers work, regardless of where the property is located.  We always buy within our location threshold – certain areas are prime for rental properties, often resulting in less vacancy and  longer term tenants.

2. Know your numbers

Long term profits on a real estate investment are made at the time of purchase.  That’s why it’s so important to buy low and sell high.  Even before you make a  purchase, you should be thinking about your exit strategy ie. how long are you going to hold the property, are you going to leverage the equity in the property to buy another?

By making certain your mortgage payment is as low as it could be, keeping the operating expenses at a minimum, and pricing the rent amounts correctly, you will find that you will not only create a positive cash flow, you will be able to create the wealth you want for yourself.

3.  Partner with experience

First-time investors should find a real-estate agent experienced in investment property deals who can help you locate profitable properties.

A second option is to partner with a more experienced real-estate investor and perhaps even work  to close a deal together. An experienced real-estate investor may be willing to work with you in exchange for the capital you can provide, giving you the opportunity to glean investment knowledge and experience firsthand.  Even if you don’t like the idea of working with other real estate investors, it’s always a good idea to talk with them about pitfalls and challenges they’ve experienced.

It really does take time, experience and a good eye for location and detail to achieve good results, – but they are achieveable results!

Richard & Jane

 

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5 Responses to “There’s No “One Size Fits All” in The Real Estate Investing Game”

  1. Prague Property

    09. Dec, 2011

    Great article. It is amazing how many investors dive in based on what their buddies are doing without completing their own due diligence. Especially in an market outside your home area you need to really take an personal interest in the project, unless you have money to burn….Nathan

  2. Jane

    09. Dec, 2011

    Thanks for your comments Nathan. I can’t stress the importance of conducting thorough due diligence. It is fundamentally the most important part of any deal, yet so often overlooked by investors.

  3. Prague Property

    10. Dec, 2011

    How is the real estate market in Nova Scotia right now? I think overall in Canada it has been incredibly resilient. Do you see that continuing?

    Although we live in Europe now my wife and I are originally from Calgary and have some real estate investments in that area so always interested in getting feedback on the market.

  4. Jane

    10. Dec, 2011

    Canada has weathered the storm well, Nathan. Nova Scotia has fared very positively, securing the $25bn Ship Building contract is a game changer for the province. There’s a lot of investors jumping into the Halifax market based on media speculation despite no real economic changes happening (yet). Halifax is a city with a bright future! How do you like living in Prague?

  5. Prague Property

    12. Dec, 2011

    That’s good news for Nova Scotia!

    We don’t actually live in Prague but in Brno, which is the second largest city. Real estate in Czech Republic has taken a bit of a dip through 2009/2010 but has been in a slow recovery for about a year now. However, with the eurozone crisis on the horizon I expect we will have problems in 2012.

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