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Updated by fircgroup on Sep 18, 2017
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Three Things That Make a Smart Real Estate Investment

Making a real estate investment is more than just finding a property you like and seeing whether or not you have the assets to purchase it. There are aspects that can determine whether or not the investment is good, great or a failure.

1

Goals

Savvy real estate investors are always searching for way to get ahead in a very competitive market. The goals of every real estate investor include earning wealth based on the risk being taken, while minimizing the amount of time needed attending to the property. To help you achieve these goals, here are three things smart investors look for in an investment property.

2

Low Risk

Investing in real estate is always high risk. However, development of real estate, land, Tenant-In-Common (TIC) investments, private real estate funds and fixer uppers are all more risky than buying a well-established cash flow investment property like a rental that you know will continuously have tenants. In many investments, investors never see a dime of their money again because so many things can go wrong. Finding the right investment requires due diligence. Real estate investors much analyze properties and review reports to make an investment with as low of a risk as possible.

3

A Fair Cash-on-Cash Return

Investing in real estate requires taking money out of your liquid financial assets such as stocks, bonds and CDs. But the real estate investment itself is a very illiquid asset. If you were earning a rate of between four and six percent on your liquid assets before, you should strive to earn close to that with your return on real estate. The easiest way to do this is by finding positive cash-flow properties that earn you decent returns.

4

Minimal Time/Management

Some properties just aren’t worth the time and effort. A property that fits that bill is not a smart investment. Vacation rentals, low-quality properties in bad areas and college rentals are all examples of potentially bad investments that will leave you spending more time managing the real estate than you had initially anticipated. Furthermore, being courteous to your tenants and treating them with respect is a good way to build strong relationships and reduce hassle when it comes to property issues.

Smart real estate investments tend to be nice, boring, wholly owned, positive-cash-flow properties that are in good shape. They are out there to be had, but it’s not as simple as just picking and purchasing. Hard work and extensive research will be required on your end.