In case if you are looking at real estate investment and want to get the best capital growth then you need to keep two main points in mind.If you follow this route you will maximized your return and limit your risk so, here are your two important tips for maximizing your returns on real estate investment property.
Property Price to Reward
If experts are to be believed, when buying investment real estate property we all want a cheap deal, but keep in mind you need to balance the risk reward and this means buying property with the best risk to reward. For instance, you can take a risk and buy a property cheaply in an area that may do well in the future but you are better off buying in a position where you KNOW its going to do well. For instance buy near:
Existing popular spots
Changes in the infrastructure coming such as roads, marinas, entertainment and so on. Theoretically speaking you know the chances of popular area spreading out are high and you also know that changes in the infrastructure will see values rise. Thats why, it is important that you buy on facts, not on what you hope might happen or what you think will happen. Furthermore act and buy real estate investment properties on SOLID facts not whims or opinions!
Buy into a solid up trend
According to experts, when buying a market, buy one that has and is still producing good gains for the amount you spend. For instance buying investment real estate in the US has shown solid gains but the
real estate market overall is slowing down. On the other side of the coin there are new property hot spots overseas that realtors try and sell you that may take off. The question now arises: Will they. The answer is sure, but big variable here is the word "May". You can make more if the market does but most dont. It is advisable to look for a market with a track record of gains, rising investment and property prices that are fair value. Costa Rica is an ideal example. Fact remains that a good solid up trend for years, rising investment and beach front property up to 70% less than in the US and only 3 hours away. Will this trend keeps on rolling The answer is more or less yes, as baby boomers look for new homes there are plenty of Americans in Costa Rica already and the demand looks set to continue. It is worth mentioning in this regard that many people when buying investment real estate property think that once a market has taken off they have missed the boat but this is not true. Always remember that property trends can last for 20 or 30 years in some areas.
Get local help
In case if you are buying overseas real estate investment property, make sure you get a decent attorney so everything is done correctly and you are not caught out. Furthermore remember laws in other countries are different and you should not assume there the same as in the US or your country of residence. In addition when you are buying investment real estate property follow the above three points and you will maximize the risk reward on your investment and enjoy some solid capital gains in the years ahead.
Real Estate Investing By The Numbers
Fact remains that you might skip looking at a property before making an offer because of time constraints, especially if the property is far away. In case if you can't get it for a price that makes sense, why spend your time traveling to look at it It is worth pointing that a good price and terms that make sense - these are what is most important.
In addition you'll probably want to look at the actual property eventually, but whether or not you see the property before you make an offer isn't nearly as important as making sure the numbers make sense.
For instance, investors value income property according to current cash flow, or at least they should if they want safe and viable real estate investments, so start by verifying income. It is advisable to ask for actual income figures for the past 12 months. According to experts, it's a good idea to think about the potential income if the rents are raised, or vending machines are added, but you should base your offer on the current income. For your good luck, this can be done by phone and by mail. Furthermore you can also verify all expenses this way, but if any expenses listed by the seller seem unusually low, they most likely are. Moreover substitute your own best guess in place of any suspicious numbers. In addition subtract the expenses from the gross income to determine the net operating income, and then apply the appropriate capitalization rate to arrive at the value. If you are not sure about how doing this It is advisable to learn how, don't just ask someone to do it for you. Furthermore you really should understand the principle of how to figure value based on a cap rate. Always remember that real estate investing is all about the numbers. It is advisable to subtract your expected loan payments (talk to your banker), from the net operating income to see how much cash flow you'll have. By doing this you can figure your cash-on-cash return based on how much of your own money you put into the deal. Moreover simply divide the annual cash flow by your investment.
In simple terms, do the numbers work After that you can safely make an offer. In theory, the various inspections will tell you if there are problems that will affect the cash flow, and you can always renegotiate if there are such problems (assuming you made your approval of all inspections a contingency of your offer). Also you can go look at the property now, but real estate investing is about the numbers.