By: Kinan Beck
Real estate is one of the best investments that you can make. It's a more stable and sound investment than many of the other financial investments that you can drop your money into. But how do you go about buying real estate that will actually make you money? Here are some tips to guide you in buying income producing real estate:
1) Consider the different ways that real estate can provide income. First, you can buy a property with the intention of renting it out to generate monthly income from renters. Or you can buy a property as a "fix-up" which you can then sell for a profit. Finally, you can purchase a property with the intention of letting it sit for a time until the market takes a turn and the value improves, at which time you sell it for a profit. Figure out which method you want to use for producing income with your real estate purchase so that you know what kind of home you're looking for. After all, you don't want to buy something that really needs to be fixed up if you're planning on renting it out right away.
2) Do your math. If you're going to purchase real estate with the sole purpose of earning money from it, then you need to look carefully at your financials. Know in advance what you can afford. Figure out which loans are right for you with consideration of the amount of time that you might be paying interest on those loans. Figure out realistically what kind of profit you are likely to make over time. While it can be tempting to buy a property that looks good, purchasing with income-generation in mind means looking more closely at the budget.
3) Look at the non-financial costs. Consider what buying this property will mean in terms of your time. If you're going to rent the property out, you will need to get and keep tenants, collect rent, make regular repairs and provide other on-site services that will take up your time. If you're going to fix the property up and sell it, there will be a short period of time during which the house will need most of your attention. Make sure you have the time ... not just the money.
4) Follow real estate trends. Before buying an income-producing property, you should be spend some time studying the real estate trends in your area. This will give you a good idea of when the market is right for buying (and later for selling) and will help you make decisions about what neighborhoods to buy in and what types of properties are earning money. You don't want to come in at the end of a trend when it's starting to go out of style so make sure you're on top of your game
5) Take a class. There are classes offered all of the time (even online) for people interested in getting started in investment real estate. Don't spend a fortune on one but consider an inexpensive class to be well worth the money for giving you the tips you'll need to buy smart. Research online and through the bookstore is also a good idea. In other words, know what you're doing by learning as much as you can.
6) Go in as a group. In some cases, you might know a group of people with all of the right skills to make a good investment in a property together. For example, if you have someone with renovation abilities, someone with tenant management skills and someone with real estate know-how, then the three parties can invest together, reducing extra costs and allowing for everyone to profit. Of course, you should know who you're getting into business with, but it's an option to consider.
7) Do it all by the book. Finally, make sure that you have some legal advice to assist you in making sure that everything is done properly. The last thing that you want to do is plan to make a profit off of your real estate and then end up with a problem."
