Everyone wants to invest. The issue remains on where to put your hard-earned cash for the best return on investment. Intensively looking for an investment strategy to bring you a high return on investment is what most successful real estate investors do. From there, real estate investing was born. We’re not only talking about buying a home for your family. We’re talking about buying rental investment properties that can bring you a sustainable cash flow and can increase in value with time through appreciation.
Accordingly, real estate investors flood the gates of the investment sectors to reap the rewards that they offer. While having a diversified real estate investment portfolio can bring you wealth on its own, invest in real estate properties as a physical asset that you can hold or sell for extra cash. Makes perfect sense!
Let’s say you want to invest in real estate and you wish to know how to make the most out of your first few rental investment properties. At any rate, there are many methods that you can employ to your advantage. There remain two key determinants to your success in real estate, and they are:
- Maintaining a positive cash flow at all times.
- Make use of leverage.
Accordingly, employing these two ingredients to your advantage and knowing how to manipulate and utilize them have worked wonders for those before you, so learn all you can about them.
How can you make the most out of your first rental investment properties?
Follow these general guidelines to get you where you wish to go:
Use leverage
You hear the word leverage here and there in real estate investing. It basically means borrowing money and utilizing it to enlarge your investment possibility. This works best when rents and real estate values are rising. In other words, if you borrow a certain amount of cash to buy rental investment properties, it all comes down to having a fixed interest rate on a mortgage.
In other words, leverage is created when you are getting the most value out of your real estate investment which you borrowed the money for from a certain mortgage lender. Many real estate investors fear it, but for those who take the time to learn about it, it worked tremendously for them by helping them expand.
Related: Real Estate Investments and Leverage – All You Need to Know.
Note: It’s always best to consult a professional real estate investor or read more about utilizing leverage for your real estate investment properties before jumping on the bandwagon.
Invest in single family homes first
An obvious one for novice real estate investors. Invest in what you know. This works great for beginner investors as they know how to manage their own households. By doing so, you will not go through the extensive and ultimately expensive repairs of a multi-family property.
Return on investment
The entire concept of buying rental investment properties is to have a return on your initial investment. In other words, the higher the better. A good return on investment can be measured by the capitalization rate of a property. The best way to ensure a high return on investment is an investment property analysis through a comprehensive investment property calculator, which is coming up next!
Use an investment property calculator wisely
A dollar spent on an investment property calculator is better spent on it than anywhere else. Why is that? Because, my friend, you can learn what your current market value is and predict the future as well. Another major advantage is knowing what rental income a property can generate compared to others in the market. With Mashvisor’s investment property calculator, you can know any measurable figures of your possible property, such as the cap rate, cash on cash return, and even the occupancy rate of the area. Click here to enjoy your 14-day free trial with Mashvisor.
Diversify your real estate investment portfolio
Don’t put all your eggs in one basket. And that’s what smart real estate investors do. Have a bit here and a bit there. The main advantage that this can offer you is creating a safety net for you if a certain type of investment isn’t generating enough cash flow. With a diversified real estate investment portfolio, you shield yourself from any market fluctuations. The way to do so is investing in different types of rental investment properties like commercial real estate, residential, or even industrial. Many real estate investors go as far as investing in land. Follow in their footsteps, it’s solid!
Out-of-state real estate investing
Out-of-state real estate investing is a thing that most real estate investors haven’t even considered. Why not? Don’t limit yourself, find a location that you like and that can offer you what you want out of rental investment properties and go for it. If you’re worried about managing a faraway property, hire a property management company to take care of all that and voila, you’re going to the bank to cash that first rent check.
Related: Buying a Rental Property Out of State: Pros and Cons.
Invest what you must to ensure positive cash flow
In an ideal scenario, you will pay for your rental investment properties in cash. But that’s not the case for most real estate investors. Therefore, you can take out a mortgage to help you out with the financing. What many real estate investors forget is ensuring that they need their investment properties to generate money monthly. On the other hand, many investors who don’t figure out the numbers end up reaching for their wallet to cover expenses. Big mistake. Be that as it may, ensure you are making a positive cash flow by balancing the down payment on your mortgage.
Invest in location
The best locations to invest in real estate, where can you find them? Well, a good location can be found anywhere, in any city and in any state. A good location has many scales to be measured on. For some, a good location may mean buying rental investment properties near amenities, grocery stores, or even restaurants. For others, a good location may be one with low foot traffic and dense population.
Related: How to Choose the Right Location for Rental Properties.
It’s best to study your ABCs of real estate investing before you buy rental investment properties. So, spend time learning about real estate investing and get your real estate education from the right streams to aid you in making the right deal. Most importantly, start investing today. Today’s rental investment properties are tomorrows income generating assets!