Monthly Archives: February 2016

Why You Should Invest In Real Estate

The goal of any real estate investor is to earn as much as possible with minimal risk. You can only achieve this 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.

First, you need something with a good return. To invest in the illiquid asset that is real estate, you will have to take money out of your liquid assets. You need to make sure that the rate of return you get is similar to the one you were getting through liquid investments. 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. Cash flow is what actually comes into your bank account from your rental properties after you have met your financial obligations. If you can, try to leave your cash flow alone in a bank account to create significant savings. As rent prices go up, your cash flow will rise too. If your mortgage payments stay the same, then your cash flow will be even better. You should be looking at a cash flow of at least 20%. There are some great online resources in terms of calculating your cash flow.

If you don’t have a lot of money to invest in a property yourself, it is easier to get started in this world if you are still young. This is due to the fact that banks will generally want you to put at least 20% down on a rental property mortgage. Unfortunately, 20% can be much too high, particularly if the property needs repairs as well. However, those who are younger can often get better deals on mortgages, as they have longer to pay them back. Real estate investing does involve a lot of other things as well. One of the things you will need to work out is which property to invest in at all. However, even this requires a whole lot of research and analyzing. You also need to work with a good realtor to represent your needs. Together, you can start looking for properties. You will then also need to learn about and research what it means to be a good landlord, which takes a significant amount of time as well. Don’t let this put you off, however.