Basics of real estate investment

Whether you’re a long time investor, or new to property investment, there are basic rules. I’ve talked about some of these basics before, and when it comes to real estate, it can’t be stressed enough that in order to make your investments profitable, there are essential aspects that you need to know.


There is no standard or norm when it comes to investing in real estate.  Some investors have simple portfolios and only focus on one type of real estate. Others diversify and branch into various areas of the property market such as commercial, residential rentals or industrial locations. Some people hang on to their properties for long term growth and others prefer to flip their properties to capitalize on increasing wealth. The approaches to investing in real estate are almost as varied as the properties you can invest in.  But whatever you do, you will most certainly use the basic principles of investing in real estate.


If your ultimate aim is to make money from your real estate investment, the best method is to hold onto the property that you buy. If you can, try buying the type of real estate you want to invest in, in bulk and allow time for the properties to appreciate. Generally speaking, real estate is a long term investment so it’s a good idea to stop thinking of it as a get rich quick scenario if that has been sneaking into your head.


Look for properties that will provide a good cash flow for income. You’ll need renters to secure this, so look for the type of properties that people need or want. A big part of this is location. And while the old adage Location! Location! Location! may not always ring true for property purchases, it certainly plays a big part in investment success. If your rental property isn’t in a desirable location, you have an increased risk of high vacancy rates, and regardless of what you paid for it, the home is more likely to become a cost to you than an source of income. Your long term objective should be to have all of your properties providing you with a positive cash flow.


Also try to purchase your investments from a motivated seller. If someone is keen to offload their real estate, they’ll more than likely end up giving you a better deal. You don’t want a seller to waste your time, and if they don’t really need to sell or aren’t in a hurry, that may end up happening. And time is money, as we all know in the world of investing!

Finally, try to think like a bank. The less you outlay on your investment property, the more profit you stand to make. If you need to borrow money, take the time to find the lowest interest rate you can, or better yet, borrow from a wealthy friend who you convince to give you amazingly good terms!   

Posted by Charles Tarbey on 21/10/2009 at 2:17 PM | Categories:


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