Not All Real Estate Investments Are The Same

I get calls almost every daIy from investors looking for deals in Real Estate. They all have the same formula and its simply Buy Low/ Sell High. If  Real Estate was that simple we would all be Billionaires and I say Billionaires because it is no longer important to be just a Millionaire any more.

To all those interested about learning about Real Estate Investment then you need to do some research first and develope a plan.

  1. Types of Real Estate:

First you must understand the different types of property to invest in and the risk vs reward for each type. For expample a single family home is probably the easiest to get financing but there are more investors looking for SF homes just like you so the downside is there is too many people looking for the same property type. I personally do not like SF as an investment for several reason. As a rental SF homes are either 100% occupied or 100% vacant. There is no in between. You either have cash flow or money is coming out of your pocket. SF homes are also difficult to manage if you have multiple properties and they are not located near each other. This can be a nightmare for an investor.

Other Types of Real Estate to consider are Multi-Family but anything under 6 units will probably not have the cash flow required by most investors.  Mixed Use is a preferred property type. If you can find a good location with retail and apartments then you have the ability to get a commercial tenant on NNN lease and have apt rents above. By mixing up the tenants with commercial/retail and apartments you will have less vacancies and if one is vacant then the other may be easier to rent. There are other types of real estate to consider but not a topic for this discussion.

2. Length of Time to Hold:

I see many people looking to flip real estate. I am not a fan of working with these type of investors because they have this formula that they have to buy, fix up, and flip and make profits. I say to them its not that simple. Real Estate was not intended to buy and hold for a short time to make money. Real Estate was supposed to be something you buy and hold to build up equity and it was equity in real estate that gives you wealth.

3. Price:

I understand that people who have a little money saved want to invest that money to make more money. I also know that people are always attracted to low prices and yet the saying goes you get what you pay. Lower priced homes are going to require some money to maintain and have limitations on what someone else will pay for it when you decide to sell.

4.Valuations:

There are different ways to value real estate.  Some are quite simple  while others are more complex. What ever model used it must have a way to analyze a Return on Investment (ROI) . In other words this ROI analysis should  give you some indication of what you investing and costs involved, risks involved, that will eventually give you a summary of ROI. If you do not have an understanding of real estate values and the risks involved then you should not be investing in real estate.

 

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