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For convenience, most investors who own single-family rental houses limit their search for properties to a geographic area that falls within a 30- to 60-minute radius of their personal residence. These investors want to remain close to their properties so that they can easily deal with day-to-day issues (showing the property, making repairs, disciplining tenants, and so on). As an owner of commercial investment properties, especially as you gain experience and trade up to larger properties, you can broaden your horizons. With investment properties, you delegate day-to-day tasks to your property manager and leasing agent.
Ideally, invest in those geographic areas that provide good cash flows and high potential for property appreciation. Before you choose a location, investigate its local job picture. Assess its potential for growth in population and new development of competing properties. During the next decade or two, real estate investors in some areas will enjoy a doubling, tripling, or even quadrupling of their property values and rent levels, whereas property owners in other locales may do well to merely keep up with inflation. Think about the length of time you plan to hold each of your acquisitions. If you plan to fix and flip, your economic and market analysis need not look out further than 6 to 12 months. On the other hand, as a buy, improve, and hold investor, take a mid- to long-range perspective of, say, 3 to 15 years.
Different time perspectives lead to different investment choices. Right now, many lower-priced neighborhoods, communities, and even countries are poised for property appreciation; however, to be successful in some of these areas may require a patient investor. If you want to earn quick cash, find bargain-priced properties that you can fix up and immediately resell (or exchange). In any case, don’t choose your locations or your properties until after you’ve clearly thought through the when and the how of your exit strategy. Want to make money in real estate? Want to avoid losing money in real estate? Then monitor the population, employment, and income trends in the cities and neighborhoods where you invest. Or more proactively, look for those cities, neighborhoods, or countries that are poised for takeoff.
Nearly all real estate authors tell investors to buy at a bargain price. But what is a bargain price? Below-market value? Maybe. How about above-market value? Again, maybe. The fact is that you score a bargain anytime you pay a price today that will look dirt cheap 3, 5, or 10 years from now. How can you tell which markets will appreciate the most during the coming years? How can you tell whether that below-market price you pay today might look expensive (not cheap) 5 or 10 years from now? Study the economic base and growth potential of the area where you are investing.
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Source by Raymond Pedersen