Goal-Setting Tips for Real Property Investors
I simply love the real estate market. I like it as an investment, but I also enjoy construction, and the thought of building something brand new from something that’s old. Oftentimes, it’s simply tough not to fall in love with bricks and cement.
But, we need to all keep in mind that investment real estate is a vehicle for improving our financial condition and reaching our goals, not a romantic notion. So before we go any further, say after me: "This year, I’ll simply acquire property that meets my aims."
What ARE your goals? Think about it. What is it that you really want investing in real estate property to do for you?
…Make your savings grow more quickly than they will if they were deposited in a banking institution?
…Replace your monthly income so you can quit your job?
…Build up your retirment savings?
…Make it possible to upgrade your way of living?
No matter what your particular goal is, you want real estate to help you become more moneyed and improve your revenue. So while you are designing your investment actions for the incoming year, I encourage you to focus on investment opportunities that receive positive cash flow beginning the first day.
Prices on Chicago’s two to four apartments have gone up a great deal in recent years that it has become more and more challenging for a property investor to yield any cash flow after expenses and mortgage payments. And that is chiefly because small buildings are now a popular option for home buyers whose primary objective is to offset monthly mortgage payments, instead of making a profit.
As a an answer to high real property costs, several real estate investors utilize interest-only mortgages in order to make their payments low enough to make profitability possible. Other real estate investors merely put up with the negative cash flow, hoping that rents will go up or appreciating property values will let them sell for a profit — thus making all the cash they’ve lost during ownership worthwhile.
In general, I do not recommend either strategy.
First, appreciating rates of interest are almost certain to create challenges for real estate investors who are relying on this scheme. Short-range price appreciation is apt to slacken (or even stop) as borrowing money becomes costlier. Plus, steeper interest rates mean more mortgage payments since interest-only mortgages come with an adjustable rate after the introductory fixed payment time period (normally only 6 months to 3 years time).
Instead, consider investing in an apartment building that has at least five units. Anything bigger than four units is viewed commercial real property, and earning positive cash flow becomes very simpler once you pass over that threshold.
That’s because homebuyers are not a part of the commercial real estate market, and majority of lenders automatically take into consideration the property’s ability to earn adequate revenue.
Indeed, you’ll need to have some cash free to invest. The traditional deposit is twenty percent, but there are lenders who are willing to finance buys with 10% deposit. That implies you could buy a $1 million property with as low as $100,000 down.
Start thinking of where you can get your capital for real estate investing. Perhaps you have equity in your house or an investment real estate property you have had awhile. Approach family members, friends and business colleagues if they’re open to a joint venture. Think of how much your income tax repayment can be.
Be inventive. Just commit yourself to taking action and doing all that you can to make certain the money you invest works hard.