Choosing The Right Investment Property
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. It is strange that so few people consider rental properties as an investment, even though the returns can be so high.
You may want to compare rental real estate to the stock market. Although most of us aren’t stock brokers, we do tend to have an understanding of the system, and we know that we have to spend money to make money. However, there are no guarantees at all that stocks will actually perform well. The same is true for retirement calculators, who simply “guess” when we will die. This means that you could end up broke if your life lasts longer than the estimate that was made.
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. Your cash flow will also go up as rent prices go up. If you have a good mortgage construction, where your payments stay the same, this is even better. The best cash flow is at least 20% of your overall income from the property. Make sure you take advantage of the online availability of cash flow calculators.
If you don’t have a lot of money to put down, you will find that it is easier to invest in rental properties if you are younger. If a bank is to provide you a mortgage for a rental property, they will usually want you to put at least 20% down. This can be a significant amount, particularly if the property needs repairs as well. However, when you are younger, banks are generally more lenient and understanding. There are quite a few other things you need to look into. Of course, one place to start is actually finding a property. If you want to find a property, however, you need to have the time to do a lot of research and you must analyze your options. You also need to work with a good realtor to represent your needs. Their goal is to make sure that you find good properties and make solid investments. Once you have found a property, you will need to go through the process of actually becoming a landlord, which also takes a lot of training and research. However, do always remember that it is absolutely worth spending this time.