Things To Know Before You Invest In Real Estate
All real estate investors are looking for options that have high returns and as low a risk as possible. This is only possible if you know how to make smart choices. The following three things make for an excellent real estate investment to help you get started.
First of all, you want to get a return on your investment. Real estate is an illiquid asset that require you to take money out of your liquid assets. You need to strive to get a return rate that is the same as what it was on your liquid assets. In other words, you are looking for a property with potential cash flow, rather than a money pit.
Applying this to real estate investment, what you are looking for is not appreciation, but rather cash flow. Calculating your cash flow means you need to work out how much money from your rental is left after you have paid for all the necessary expenses. What you should do is leave your cash flow alone, and keep that as savings as much as possible. Your cash flow will also go up as rent prices go up. Best of all, your mortgage payments should stay the same. A good cash flow is at least 20% of the money you get in overall. There are some great online resources in terms of calculating your cash flow.
You could also look for REITs (real estate investment rrusts). Although this means you don’t need as much money to get started, it also means the returns are smaller. When you sign up with a REIT, your money is invested in real estate corporations. Hence, you could invest in anything from an apartment block to a retail park. You can keep track with the performance of a REIT through the NASDAQ and stock exchange. A REIT, essentially, is like a mutual fund that only looks at real estate. Before you start, however, you need to think about a few things. The economic conditions of the key holdings is one. 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.