All real estate investors are looking for options that have high returns and as low a risk as possible. Only if you know how to make smart choices will you be able to achieve this. Luckily, if you know the three things that indicate a great real estate investment, you are a step closer to achieving that.
First, you need something with a good return. Real estate is an illiquid asset that require you to take money out of your liquid assets. What you should look for is to get the same or similar rate of return. In other words, you are looking for a property with potential cash flow, rather than a money pit.
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. You can save up your cash flow and see a really fantastic pot of money building up. Additionally, as your rent goes up over time, so will your cash flow. If you have a good mortgage construction, where your payments stay the same, this is even better. The best cash flow is at least 20% of your overall income from the property. There are some great online resources in terms of calculating your cash flow.
You could also look for REITs (real estate investment rrusts). REITs are popular because they are cheaper to get involved in, but the returns you will see are not as high either. Working with REITs basically means you invest in other corporations. Hence, you could invest in anything from an apartment block to a retail park. You can find the value of a REIT on the stock exchange and NASDAQ. A REIT can be best compared to a mutual fund, although the REIT invests solely in real estate. You do need to think about a few things before you invest in a REIT. Consider the key holdings’ economic conditions for starters. Find out how the REIT has performed in the past. You should also consider their future plans. Also, you need to look into who manages the REIT and how they have performed. Last but not least, consider what the real estate market looks like and how this could affect how your REIT will perform.