Choosing The Right Investment Property

Investing in real estate can be highly successful, or it can be a complete failure. You may believe location, location, location is the number one rule, but the reality is that knowing who you are dealing with is even more important. However, the world of real estate is filled with shady characters. Think of the people you see on late night television, who promise to make you a millionaire.

You should never invest in real estate before having a few affairs in order. The first thing you need is your investment capital. Also, study the real estate market and get to know the neighborhood you are interested in.

You also have to make sure that you don’t take too many risks. Real estate is never risk-free, but some have much higher risks than others. Avoid tenant-in-common, real estate development, fixer uppers and private real estate funds for instance. With these options, it is highly unlikely that you will see a positive return. A much better idea is to title interesting properties to yourself. Naturally, this means you need to take the time to do research and analysis, and you must exert due diligence. Try to find a property that you don’t have to manage intensively and that doesn’t take up too much of your time. Stay away from student rentals, vacation properties and bad neighborhood homes, for instance. What you want is a long term rental opportunity with tenants with a good credit profile. This does require a commitment on your side to treat your tenants with the respect they deserve. There will always be issues with rental properties, but so long as you resolve them quickly, you should have a good investment.

You can also decide to look into a real estate investment trust (REIT). REITs are popular because they are cheaper to get involved in, but the returns you will see are not as high either. Through a REIT, you basically invest in real estate corporations. This can be anything from a construction company to a theme 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 investing in a REIT, there are a few things to learn about. Look into the economic conditions of the locations of the key holdings first. Also look into the performance history of the REIT. You should also consider their future plans. Also find out who the REIT is managed by and what their experience is. Finally, what is the state of the current real estate market and how will the REIT respond to any changes in this market?