While investing in real estate properties, you look forward to earning maximum wealth with little risk, and having to spend as little time as possible with the process of acquiring property. In order to go through the investment process smoothly without any hindrance, you need to make some smart choices before the actual purchase. To start your process, focus on the 3 following objectives when creating your real estate investment strategy.
Buying a property means you are taking money out of your liquid assets such as stocks, CDs, bonds, etc., and investing it into significantly illiquid assets or those that cannot be easily converted into cash. Initially, you were earning some nice returns on your financial assets such as 5% or 6%. But the case of investing in a real estate property is otherwise, where you have to work hard to earn a decent cash return. To make this happen, try to invest in properties that hints or promises positive cash returns, rather than the prize properties that are negative.
One thing that should never be forgotten: real estate investments possess extremely high risks. Land, Tenant-In-Common (TIC) investments, private real estate funds, development of real estate, etc. are all examples of high risk investments as compared to more feasible choices of nicely established cash flow properties. Investing in a real estate property puts many things at risk and especially your cash.
Therefore, it is better to go with the option of fee simple title—a form of property ownership in which the owner has complete right on what use they put the property on. Additionally do some homework of proper due diligence, analyzing, testing and reviewing reports to evaluate your buying decision.
Some investments eat up a huge amount of time in the maintenance or management of properties, for e.g., poorly maintained properties in unreasonable areas, vacation rentals, college rentals, etc. Renting a property to tenants with reliable and acceptable credit history will ask only a small portion of time in managing.
Also, the Golden Rule in real estate transactions is essential. Maintain a positive and respectful relationship with your tenant that will most often save you from management hassles and other critical issues you need to address.