Investing in real estate has many risks that can derail even the best-looking deals. Make sure you address the known perils and reduce the probability that something will go astray with your purchase.
When you buy real estate, make sure that you are making a smart financial decision. Rentals make sense if they are cash-flow positive and provide a fair rate of return on the invested equity. Investors should not purchase negative cash flow properties, period. Make a decision to purchase real estate based off logic, not feelings! Typically you make money on the purchase, not the sale of your real estate investments.
Manage Rentals Well
If your property is a rental, make sure to secure responsible tenants and keep them for as long as possible. You’ll make the most money with the least hassle by keeping your tenants happy enough to make a long-term commitment.
Buy a Property in Good Shape
Fixer-uppers may be a good option for a buyer that is experienced with estimating the costs of repair. However, for the average investor, fixer-uppers end up costing more than expected, and it’s best to look for other real estate investments.
Secure Long-Term Financing
Make sure to take out long-term fixed interest rate financing. It costs significant amounts of money every time you finance or refinance a property, so try to do just one financing at purchase. That way you won’t have to worry about interest rate changes in the future.
Review Your Title Properties
All buyers should review the title insurance policy, schedule of exclusions, and title abstract. Be sure to schedule time with your title insurance agent to go through any issues before making the purchase.
Property and Liability Insurance
Keep proper insurance in place and for an appropriate amount, as needed for the specific property and your specific circumstances. You should sit down with your insurance agent and discuss your complete financial and insurance situation. If something does happen, your insurance company will work with you to reduce the chances it might significantly impact your finances.
If you want to make a better real estate investment, the areas above are good places to start. You will reduce the likelihood of property issues occurring that could cause you financial pain or take up an excessive amount of your time.
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