Most people are interested in adding real estate to their investment portfolio. However, simply adding random properties or making investments that don’t pay off or make a profit is not an effective use of your funds.
Savvy investors working with financial advisors can develop a strategy for real estate investment that is going to provide a good return on your investment. Knowing what is a good opportunity for short- or long-term profits is always a critical factor.
Some tips and strategies for effective real estate investments include:
• Realtors – It is critical to work through a Realtor you trust for real estate investment. Unless you have significant experience in real estate transactions, trying to do the deal on your own can result in money left on the table at closing.
• Flipping is not investing – While there are a few people who are experienced in flipping homes, it is not a successful investment strategy for those with limited funds or those not able to make a realistic appraisal of the cost involved in the upgrades and renovations.
• Down payments – If you have to borrow to invest, you will not begin building wealth for years. When you have a large portion of the price available to put down, this can work, but not if you are putting down the minimum amount. In addition, if you are considering using the property as a rental, can you cover the cost of the mortgage for at least three months between renters?
• Your credit score – If you have to take out a mortgage, your credit score will be the key factor in getting a good interest rate on the mortgage. If you don’t have a top credit score, you may be losing money each month compared to what you would make through another type of investment.
Finally, it is critical to choose properties that are going to appreciate and not stay flat or depreciate. Cheap properties, where there is no demand or properties that require major upgrades, do not have the investment potential people often believe.