Though there are more horror stories about real estate investment, there are some success stories too. The horror stories are narrated by those who have never invested in real estate. If one adheres to few steps while investing in real estate, there is nothing to stop him from achieving huge success as well as profit.
- Take advantage of unique real estate investment tools viz, leverage and appreciation. You can leverage investment in real estate by investing part of your money and borrowing the remaining part from financial institutions. You pay only interest accrued to the financial institution, but any appreciation in price of the property accrues to you. So, with little investment you can make huge profit.
- While investing in real estate, it is pertinent to keep in mind various other factors which are likely to affect your overall profit. You must know the current rate of Property Management fees, Home Owner’s Association fees, cost of insurance, taxes, rate of interest if you have availed loan. Also, calculate likely appreciation of price in that particular area and pre-tax cash flow.
- You must also take into account the type of property you are investing. Single family homes may create negative cash flow, but are useful for tax deductions. Investment in Second Homes can benefit by way of tax deductions and also after two to three years this property can be turned into rental property. Hence, it is pertinent to select property that saves taxes as well as enhances profit. You can also buy such property which no one else wants to buy and which is totally out-of-shape. Later, this can be renovated is a tasteful fashion and sold earning huge profits.
- Buy and sell property at the right time. Though it is difficult to time real estate market, one should buy property when the prices are low, hold it for few years, earn some rent on it and later sell it when the prices appreciate. One can keep some target amount of profit to be made after deducting all expenses and then wait for the price to appreciate to that target amount before selling it.