Investing in real estate can be highly successful, or it can be a complete failure. As everybody knows, location, location, location is hugely important, but ensuring you deal with the right type of person is actually even more important. However, the world of real estate is filled with shady characters. These are the ones you see on late night telly, promising you untold riches.
First of all, you want to get a return on your investment. Real estate is an illiquid asset that requires you to minimize on your liquid assets. You need to strive to get a return rate that is the same as what it was on your liquid assets. This means that you should find a true cash flow property, and not a money pit.
In terms of real estate, therefore, you should look not for appreciation but rather for cash flow. The cash flow of a property is the money you have left over from the rental price after you have paid for all the necessary bills in relation to that property. What you should do is leave your cash flow alone, and keep that as savings as much as possible. Your cash flow will also go up as rent prices go up. If you have a good mortgage construction, where your payments stay the same, this is even better. A good cash flow is at least 20% of the money you get in overall. There are some great online resources in terms of calculating your cash flow.
You could also look for REITs (real estate investment rrusts). Although this means you don’t need as much money to get started, it also means the returns are smaller. REITs are popular because you are essentially investing 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. Basically, when you invest in a REIT, you are working with a type of mutual fund that looks solely at real estate. Before you start, however, you need to think about a few things. The economic conditions of the key holdings is one. Also, you should look into how the REIT has performed historically. You should also investigate their future plans. Also, you need to look into who manages the REIT and how they have performed. Lastly, you need to look into the current state of the real estate market and how the REIT is expected to respond to that.