What are the characteristics that make up the best real estate investments?
The best real estate investments are those that will help you achieve your goals using the resources that you have available as well as your personal skills as a real estate investor.
This means that determining what the best real estate investments are relies heavily on what you want as an individual investor, what your budget is for investing, the profits that you’re trying to achieve, and the skills that you have to allow you to manage your investment.
So, in order to help you determine what the best real estate investments are for you, let’s take a look at the different aspects of real estate investments and how to consider each one before deciding on the best real estate investments that are most suitable for you.
To learn more about all aspects of real estate investing, continue reading our blog.
The Best Real Estate Investments Will Generate Profits
This comes as no surprise, but the best real estate investments are those that will generate a profit. The whole premise of real estate investing is based on profitability; otherwise, it wouldn’t be called investing at all.
Since the main goal of any real estate investment is to make a profit and increase your wealth, it is only natural for the first consideration to be related to profits.
Before deciding on an investment property, it is crucial to run the numbers and see if the property has the potential to generate the amount of money that you are hoping for in your investment. To do so, you must learn the different methods that are used by real estate investors to determine the rate of return of an investment property, such as the cap rate and the cash on cash return.
The cap rate and the cash on cash return are metrics that are used to project the rate of return of an investment property to give you an idea of the returns that you should expect from investing in it. Before committing your money to any investment property, calculating the cap rate and the cash on cash return will help you decide if these are the returns that you are hoping to achieve and whether or not the investment will be profitable or viable.
Finding investment properties that have a high cap rate or cash on cash return, however, does not always mean that these are the right investment properties for you. There are other aspects that you need to take into consideration when it comes to finding the best real estate investments, such as the management of the property or the resources available for you to finance it.
Related: Understanding Cap Rate vs. Cash on Cash Return
The Best Real Estate Investments Are Easy to Manage
Most real estate investors know that rental properties are one of the best ways for making significant profits in real estate investing. This, however, does not mean that every real estate investor should invest in a rental property.
One of the main aspects that you need to take into consideration when deciding on the best real estate investments is the amount of time and effort needed for managing and running the property.
Rental properties, in this sense, are some of the most demanding options in real estate investing. Rental properties require an extensive amount of time and effort to be invested in managing them in order to maintain their condition and their occupancy rate and to get the tenants to rent the property and stay in it for longer periods.
Other types of investment properties, such as fixer-uppers, require less time for managing the property, but might also require other skills in order to succeed in them.
Before deciding on an investment property, real estate investors must be aware of their strengths and weaknesses, and whether they want to manage their own investment property or not.
Additionally, when investing in a rental property, for example, you will have the option to hire a professional property manager to manage all aspects related to your rental property. This, however, comes at a cost and should be included in your financial planning as an expense in order to avoid suffering losses or falling into a negative cash flow loop.
Related: What Are the Challenges of Owning and Managing a Rental Property and How Do You Overcome Them?
The Best Real Estate Investments Are Easy to Finance
The final aspect that I will be talking about when it comes to determining the best real estate investments for you is the method of financing. There are numerous financing options that are available to real estate investors, the most common being the conventional mortgage loan.
Knowing the options that you have available for financing your purchase can give you a significant advantage in real estate investing. If you’re investing in a rental property, for example, the best mortgage loan available to you will be different than the best option for financing a fix-and-flip.
Related: Buying an Investment Property: Cash or Mortgage?
In order to better plan your investment and all aspects related to it, you should always have a loan type that matches the type of investment property that you want to purchase and the investment strategy that you’re using. It will play a major role in calculating the different metrics and determining the rate of return that you will have on your investment.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
The best real estate investments are not a fixed type of investment properties or a specific investment strategy, but they are the perfect combination of a strategy, a property type, and your personal skills and characteristics as a real estate investor.
Before determining the “best real estate investments”, a real estate investor must ask him/herself:
- What are the main goals that I’m trying to achieve?
- How soon do I hope to achieve them?
- What is the most suitable investment strategy for me?
- What are the financing options that are available to me?
- Do I want to manage my own investment property?
These questions can all help you find the best real estate investment for you as an individual real estate investor.
Another way for finding the best real estate investments would be to use Mashvisor. Mashvisor can help you find the perfect investment property for you based on real estate analytics and data comps, allowing you to find rental properties with high projected returns that you can purchase right now to start making a rental income and generate a positive cash flow.