Buying Investment Properties
In recent years, thanks to generous tax laws, real estate investors really didn’t have to worry about the cash flow generated from their properties. An owner’s ability to generate tax losses that could be offset against things like earned income, and other creative tax strategies, outweighed the standard goal of generating more income than expense. And in a rapidly appreciating market, where you could just hold and recognize significant appreciation in value, positive cash flow was just an added benefit.
However, with the latest downturn in the real estate market, and the looming downturn in the commercial real estate market, that is a luxury landlords just dont have anymore. This website will give you, the property manager, or the property owner, the guidance that you need to navigate your way through one of the most challenging markets in years.
Before you purchase an rental property for investment, you need to have a good understanding of the different types of properties that you can own. Most real estate investors focus on specific types of properties. In general, investment properties fall into categories such as residential, commercial, industrial, and retail.
For the purpose of this website, we will focus only on residential real estate, because the majority of rental real estate is housing, and the basic concepts are easy to understand and master. The basic properties of property management we will present here are applicable for these types of residential rental properties:
Single-family Residences and condominiums/townhomes: Many real estate investors start with a rental house, condo, or townhome, because these type of properties are the easiest ones for most novices to gain experience managing. Even easier would be condos or townhomes which are ususally located in a community association property where all common areas are the association’s responsibility. Doesn't get easier than that. Need to make sure that there are no rules regarding tenants though.
Multi-Family Residences (2, 3, or 4 units): This category includes properties with 2-4 units but can technically be up to I5 units. Duplexes, Triplexes, and Quadraplexes are considered residential property, while 5 or more units is considered commercial. These properties are often a good choice for real estate investors who plan to live In one of the units and want to step up from investing in a single-family residence or condominium.
Apartment buildings (small): These types of buildings usually have between 15 and 30 units and are often required to run with on-site management and regularly scheduled maintenance staff.
These factors influence real estate as an investment:
Almost everyone has heard the old cliche that the top three keys to real estate are location, location, location. . Unlike a stocks or bonds, real estate cannot be quickly liquidated into another investment in a different geographic area. Often Real estate success is closely correlated to the price you get at a property’s location.
Real estate’s also a very cyclical, and a business that is subject to the Economics 101 basic concept of supply and demand. During economic business expansions, the demand for real estate is strong, enabling owners to raise rents. Loose credit allows for the purchase With the higher rents, real estate developers can build new properties, which causes the supply of real estate to catch up with the demand and forces rent increases to slow or disappear. When the business economy begins to slow, the demand declines, and once again you have an abundance of rental real estate. This cycle typically repeats every seven to ten years but can go longer. One of the best reasons for investing in residential real estate is that it tends to be the most stable sector of the real estate market.