What makes a great real estate investment?

If you were to ask a wakefield estate agent – or any real estate agent, for that matter – “what makes a great real estate investment?” you would …

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If you were to ask a wakefield estate agent – or any real estate agent, for that matter – “what makes a great real estate investment?” you would get a range of answers. Still, there are a few basic principles you can follow for a safer real estate bet when you decide to put down some cash on a property that you think can help you make money in the long run.

With that in mind, let us take a look at a few guidelines for making good real estate investments.

Find low risk opportunities

While it is true that all real estate is considered a high-risk endeavor, it is possible to minimize that risk. Examples of higher risk profiles include tenant-in-common (TIC) investments, private real estate funds, real estate development, land, or places that need renovation before they are considered marketable. So avoid these kinds of properties!

Instead, you can look for a piece of real estate that has an established cash flow. One way to do that is by just taking a fee simple title, or finding a property that is possible to wholly own. Of course, it goes without saying that the requisite homework that goes into evaluating a potential investment – the analyses, tests, review reports, etc. – are crucial to minimizing risk in these scenarios.

Seek low-maintenance properties

If you are constantly having to address concerns by tenants about leaky pipes or other malfunctioning utilities, that is going to make for an expensive and bumpy ride along the way, plus you introduce the potential for arguing with tenants over what is whose responsibility. A lot of places – no matter how nice they may seem by potential alone – are simply not worth the time or effort that it will take to maintain the upkeep, or even the prerequisite work done to make it presentable in the first place.

Some potential real estate traps that would fall under this category include rentals near universities, poor quality homes in undesirable neighborhoods, and even vacation rentals. In contrast, look for “boring” properties that have long-term lease agreements to tenants with good credit ratings for a more reliable, less hands-on experience.

Avoid the trap of costly properties

While it may seem like an enticing investment to have a fancy home in your name, the truth is that this kind of rental arrangement rarely works out. That is because there are typically higher down payments as well as higher mortgage payments on a monthly basis, which means you have to charge more to cover those expenses.

Sometimes, the market simply does not allow for you to earn enough each month to cover those costs. Usually, there are also more costs associated with maintenance fees for such a nice house, so just do yourself a favor and avoid these kinds of properties.

Understand the demand

Enter the mind of a typical renter and know what they are looking for in terms of a secure location, public transportation, and if kids are involved, a good school district. Other amenities like a grocery store, shopping center, or even a park to play in or walk around are usually also big pluses. More centrally-located, accessible properties are the way to go to enjoy these advantages.

While there is obviously no exact formula to securing the perfect real estate investment, finding low risk opportunities, seeking low maintenance properties, avoiding the trap of costly properties and understanding the rental demand will definitely improve your chances of being successful in doing so.

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