Good & Bad Real Estate Investments
“Some people buy real estate expecting it to appreciate a lot over time,” says David Reiss, a professor of law and research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School. “But it can be risky – or even foolish – to pay so much for a property that you’re losing money on an operating basis just because you think it will appreciate.”
The acumen in real estate can be considered just like the stocks, commodities, or any investment class. While talking about such terms, we know that the variables are many, yet we cannot miss any specific proposition. So it is important to know that where the canny money should be invested and how it should be turned into good investment.
Following are some steps to lead you in investing for your own good:
BE INFORMED WITH THE MARKET CONDITIONS
“It will make a market return, and if you want to do better than that, you have to pound the pavement,” Reiss says. If you want to earn some healthy returns from an investment property, then don’t just expend an amount based on market price. Try to gain some knowledge about the pricing schemes of properties and then search for discounts and deals to find an undervalued real estate property.
ABROGATE VACATION ABODE
As stated by Kurt Westfield, managing director of WC Equity Group, based in Tampa, Florida, “Vacation homes are nothing more than a whimsical retreat and a low-tier income option”. “Seasonally, they do have the capacity to generate decent returns, but the vacancy and holding costs coupled with typically premium pricing tend to equate to a less-than-stellar rate of return.” So, if you turn to vacation homes, it doesn’t mean that you’re going to gain advantage automatically.
GAIN PROFITS BY IMPLEMENTING YOUR SKILLS
“Depending on your availability and your skills, these could be trade-offs that are worth making for you,” Reiss states. Owing a team of knowledgeable experts is essential while performing property development, management as well as administration. But if you are sound in skills like accounting, communicating and repairing, you may save a sufficient amount doing above functions on your own.
TAKE REIT IN ACCOUNT
REIT is abbreviation for “Real Estate Investment Trust” which owns, develops and redevelops real estate assets. The national real estate practice leader at Northern Trust Company, based in Chicago, Mike Papierski tells, “Publicly traded REITs and REIT funds offer liquidity and low investment minimums”. Mutual funds offered by REIT, propose you with a mixed bag. Just be aware that “performance tends to more closely align with stock market return and may not correlate with actual property values,” Papierski states.
CHOOSE TURNKEY INVESTMENTS
In Turnkey Investment, you purchase completely appraised, recreated property having tenants as well as a property manager. A vice president and mortgage banker with PrivatePlus Mortgage in Atlanta, Scarlett Tassone says, “It’s a lot like buying a take-and-bake pizza. All the ingredients are there, and all you have to do is buy”. The downside is that compared with other tenant properties, “they are not quite as lucrative and a bit more expensive,” she says.
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BE CAUTIOUS TO RENTING
If you want to earn profits via renting properties, then it will be a nice approach only when you’re experienced in this particular sector. “Bricks-and-mortar properties require expertise and intensive management, even with investment-grade properties,” Papierski says. “If the owner doesn’t have the expertise, he or she will need to hire someone to handle the leasing and day-to-day management.” That fee is usually 4-8% of gross rents.
GO FOR PITCHING HOMES
In this approach, the main aim is to gain short-term advantages by selling properties at particular time intervals. While performing this, you should consider the neighborhood as well as additional expenses associated to the property. “This type of real estate investment has more risk than owning rental properties,” says Rebecca Pavese, financial planner and portfolio manager with Palisades Hudson Financial Group in Atlanta