Owning investment properties can be a great way for individuals to diversify their income streams and is a goal for many investors. However, there are right and wrong ways to approach investment properties. Before you jump in and sign any contracts on a new investment property, make sure to follow this investment property advice. Click To Tweet
Wondering What Not to Do with Your Investment Property?
Just like owning any business, real estate investment has risks associated with it, making it imperative that you go in with a solid plan and making the right decisions. To ensure your profit on your investment is sound and safe, be sure not to do these six things when it comes to buying new properties.
- Choose Just Any Location
- Make Emotional Decisions
- Rush Through Projections
- Over-Concentrate in One Asset Class
- Create More Debt
- Partner with Friends
1) Choose Just Any Location
We’ve all heard the number one thing that helps a business succeed: location, location, location. This is especially true when looking for investment properties. When looking for commercial real estate ventures, it is good to look at these criteria to ensure a profitable investment:
- Low unemployment rates
- Low purchase prices
- High asking rents
- Low vacancy rates
- High tenant demand
2) Make Emotional Decisions
When it comes to buying an investment property, leave your emotions out of it. This is a time you don’t want to listen to your heart but think logically. Don’t jump into a purchase because you like the property or it just happens to be available; be sure to logically negotiate and get the best price possible.
3) Rush Through Projections
Real estate investing carries more risk than traditional investments, so cash flow modeling is a crucial step that needs to be done before making a purchase.
ProTip: Purchasing a new rental property can be exciting, but make sure you don’t rush through your cash flow projections without the numbers working.
4) Over-Concentrate in One Business Class
Just as real estate can help some people diversify their holdings, it can also easily concentrate them, too. If you are just starting out, be sure to have other ventures in case the real estate, local, or national markets become volatile.
5) Create More Debt
If you are considering becoming a real estate investor, make sure you aren’t creating more debt while you do it. Be sure to have all debt paid off beforehand, such as student loans, medical debts, and credit cards, so you don’t carry these over into your new investment portfolio.
6) Partner With Friends
It may seem like a good idea to partner up with friends and start an investment company, but that isn’t always wise. Consider carefully who you do business with, or get an investment loan to get you started, instead. Like all businesses, real estate can go either way: it can be profitable, or it could end up being a disastrous experience.
Follow this Investment Property Advice
Real estate investing can be exciting and profitable when you do the right research, projecting, and choose the right location. By following the above investment property advice, you can be on your way to a successful real estate venture.
Contact us to learn more things not to do with your investment property and other investment property advice.