The perfect real estate investment is one that has high returns and very low risks. This is only possible if you know how to make smart choices. Luckily, if you know the three things that indicate a great real estate investment, you are a step closer to achieving that.
Do not invest in real estate before you actually have everything you need. First, you need the capital to make an investment. You should also look into the overall real estate market and the neighborhoods you are interested in.
Investing in real estate, therefore, shouldn’t be about the appreciation, but rather about the 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. The best possible investment allows you to leave your cash flow untouched in a bank account somewhere. Plus, your cash flow can increase as rent prices go up over time. If you have a good mortgage construction, where your payments stay the same, this is even better. You should make sure that at least 20% of the money you get is cash flow. Make sure you take advantage of the online availability of cash flow calculators.
You can also decide to look into a real estate investment trust (REIT). This means you need less investing capital up front, but the returns are not as high either. REITs are popular because you are essentially investing in real estate corporations. Through a REIT, you can invest in anything ranging from an industrial park to a shopping mall. A REIT is also listed on the stock exchange and NASDAQ. Basically, when you invest in a REIT, you are working with a type of mutual fund that looks solely at real estate. Before investing in a REIT, there are a few things to learn about. First of all, look into what the economic conditions are of the areas of key holdings. Also, you should look into how the REIT has performed historically. You should also investigate their future plans. Also find out who the REIT is managed by and what their experience is. A final thing to look into is the state of the current real estate market and how this will affect the performance of the REIT.