How to Identify a Good Real Estate Investment

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Image by Jens Neumann from Pixabay

If you’re considering making an investment in real estate, you already know some risks you may encounter. While most people talk about how to invest and where you may want to invest, have you thought about what makes a good investment? Here are a few suggestions:

• Cash-on-Cash Returns

Investing in real estate is not cheap. You’re essentially taking money you have (liquid assets) and putting them into an asset that you can’t liquidate within a day or two. If those liquid assets were earning interest, your goal should be to earn a fair cash-on-cash rate of return on the investment. Look for properties that are cash flow positive to get a modest return.

• Low on Risk

Any time you get into real estate investing it’s high risk, but there are things you can do to reduce the risk such as being diligent in analyzing, testing, and reviewing information on the property to ensure it has low risk. Another alternative would be having fee simple title ownership, which makes things very easy.

• Low on Management

The perfect scenario would be having a real estate investment property that doesn’t take up too much time in managing it. College rentals, vacation rentals and other properties in this scope that allow you to rent as long as you can to one tenant with decent credit is ideal. When you have a property like this, have a good rapport with your tenants and quickly address issues, you’re in a great space.

These are just three examples of great real estate investments that can give you a return on your investment and pose the least risk. To be successful at finding great real estate investments, you must have knowledge of the industry, the ability to recognize an under-valued property, patience, a working knowledge of how to estimate rehab costs, a vision of how you want the property to look, the ability to build relationships with others, money and opportunity.

It’s easy to think you can get things accomplished fairly quickly, but it’s very important to have a good grasp of what to expect, anticipate problems, and be able to pivot when you need to. A good realtor will be able to advise you on upcoming properties and provide insight where you have questions. The bright side? The more rehabs you do, the more knowledge you will gain and you’ll become familiar with other investors who know the ropes. Real estate investing is nothing new - it’s all about being able to spot the jewel in the sand. With a little time and effort, you'll be well on your way to investing like a pro!