Is real estate worth your money?

Is real estate worth your money?

The current real estate investing system produces a situation in which real estate catapults the available money supply in the system. This enhanced money supply is then channeled back into the real estate market. The never-ending back-and-forth between broker and real estate investor has resulted in a growing real estate pricing environment.

These growing prices are frequently a real estate bubble since the fundamentals of the economy, such as income levels, remain unchanged. This bubble bursts, causing prices to stabilize for a brief time. Real estate investments, on the other hand, end up propping up the money supply, in the long run, owing to the nature of the process, producing a self-enforcing and amplifying cycle.

In theory, Long term holding of real-estate property never disappointed investors. The key is finding a good property and finalizing the deal is the main pain that everyone goes through, which is where the investors tend to invest in properties that are ready. Finding a good property takes time, money, and effort but in the long run, the investor also learns and is satisfied with their own investment rather than investing with the developer.

How to determine what type of property you should invest in?
When you identify a motivated seller, the following step is to assess your strategy for this property. Before purchasing real estate, you should develop a credible plan and set goals. There’s no shortage of properties.

One important thing is don’t go with what is available in the market, instead develop a plan on what you’re planning to invest. 

  • Do I want to invest in Land, Residential or Commercial
  • What is the exit strategy?
  • I’m investing and staying focused on my goal?
    • Generally, investors tend to what is available in the market instead of focusing on the goal.

What the perfect first deal is for you and what deals you should never do to start with?
Finding a real estate investment deal is hard, but finding a good real estate investment deal is even harder. The right one will be based on smart choices made upfront, which will dictate your financial success down the road. Real estate entrepreneurs need to know what they’re looking for when searching for investment properties.

In order to utilize the real estate slump to their advantage, and generate real estate leads, investors should have a clear vision of what they want and set a goal. This will serve as the framework for the investment — what you’re seeking, what you can financially obtain, and how much of a return you’re hoping to get each year.

  • Land – If one is investing in land property, the main focus should be long-term to see the results and geographically within city limits. In my experience, the initial dream is big but to achieve there’re a lot more parameters the basic principles are :
    • The key is a long-term holding land property within city limits and maintaining it.
    • The focus should be long-term to see the results and geographically within city limits.
  • Residential – Your first aim should be to determine if the property you intend to invest in will generate positive cash flows.
    • The cash flow is determined by a variety of circumstances, including the health of the local rental market, the amount of borrowing, and the interest rate you will pay.
    • Also, compare the cash flow potential of certain properties to that of other homes you have considered for purchase.
  • Commercial – Commercial real estate is tricky, To start with it’s a good idea not to invest in small units until you understand the real estate market.
    • The numbers show very excitingly but the reality will be different. [The details will be shared in a different article.]

Cash flow is important in any real estate investment, How to ensure positive cash flow in all economies?
Cash flow refers to how much money is left after expenses. Positive cash flow is key to a good rate of return on an investment property.

  • Expected cash flow from rental income (inflation favors landlords for rental income)
  • An expected increase in intrinsic value due to long-term price appreciation.
  • Benefits of depreciation (and available tax benefits)
  • Cost-benefit analysis of renovation before sale to get a better price
  • Cost-benefit analysis of mortgaged loans vs. value appreciation

Cash flow in real estate, in the simplest terms, is the net difference between money coming in and money going out from your rental property. Positive cash flow is the ideal circumstance, wherein income exceeds expenses, leading to a profit for the investor.

Maintaining positive cash flow is one of the most common ways of making money in real estate. Many real estate investors go for positive cash flow properties since they provide a consistent income which takes effect very quickly after acquiring the property. Achieving positive cash flow from your rental property is one of the main ways in which you can take on investing as a full-time job.