What Makes for a Great Real Estate Investment?

While market prices may dip and rise based on financing conditions (anyone remember 2008?), the underlying value is usually sound… at least from a long-term perspective.

However, as an investor, you most likely have an expectation of seeing a reasonable return within a given time frame. As with any investment, you need to plan thoroughly and adjust your hopes to reality.

Depending on factors such as your age, disposable income and what the rest of your portfolio looks like, other investment vehicles may be a better option for you. Also, buying to rent has some unique challenges, such as spending time on building maintenance and sometimes dealing with troublesome tenants. However, with a little planning and some market smarts, property can often be a very good investment in terms of both return and risk. Here are a few factors to consider:

Look With the Eyes of an Investor, Not a Homeowner

Property investments have a minimum horizon of five years or so. Keeping that in mind, things that would be a deal breaker for the average tenant – peeling paint, a loud construction site next door – may actually work in your favor: construction will finish and hopefully leave the area improved, while repainting doesn’t cost an arm and a leg. If you can maximize this differential between your priorities and that of potential tenants, you can start ahead of the game.

Aim for Cash Flow

Most investors buy to rent the property. There’s nothing wrong with this in principle, and many have been quite successful with it, but remember the difference between liquid, short-term money and expenses and illiquid capital. It’s no good owning a property that will earn you a bundle of cash in two years if you can’t cover the mortgage payments this week.

Make Your Profit When You Buy

As an investor, you have the luxury of waiting for the right market; even a change of season can affect what prices are seen as reasonable. Occasionally, for various reasons, a property owner will be willing to sell cheap as long as it’s quick, so make friends with a few real estate agents.

Don’t let your ego get in the way, though: you want to make money, not impress your friends. A good rule of thumb is to buy the worst property in the best neighborhood you can afford, not vice versa.

Unlike day trading the stock market, most people can more or less intuitively understand what makes home prices go up or down. However, you would also be a fool to ignore the risks. Take your time, do your homework, and remember that property ownership is for the long haul.

Start by diving into our investment opportunities and be sure to check regularly – as you know, it’s a fast-moving market.