Investment property is property purchased to generate profit for the buyer. There are distinct and very different ways for an investment property to generate profit. Rental investment properties produce a residual monthly income, while buying property and quickly reselling produces a one-time cash payment real estate investors.
Before purchasing investment property real estate investors need to determine which type of investment is right for them. To determine which property is the right choice, real estate investors must first decide the goal they hope to achieve with the property.
Real estate investors with long-term goals for a residual income can prosper with rental properties. Rental properties supply monthly payments to investors. However, investments in rental properties require routine maintenance and upkeep to keep houses in good condition.
Real estate investors seeking quick turnover and lump sum payment would do well by seeking out short-term investment properties such as house flipping. Real estate investors must be able to work within a budget and timeline to make house flipping a profitable real estate investment. By going over budget or timeline, real estate investors are cutting into potential profits from their investment property.
In a buyer's real estate market, homes are oftentimes priced to sell well below market value. Unfortunately, for sellers this means less return on their investment. Homeowners and investors who hold on to their real estate until the market rebounds will see larger profits than if they sell their property today.
What does this mean for real estate investors? Simply put, for maximum profits buy now and sell later. Investment property purchased in a buyer’s market can produce the perfect combination of a long-term and short-term investment. Investment properties should be purchased when prices are low. Properties can be rented out until the market regains stability, than sold for higher profit.
To continue receiving monthly income after selling investment property, real estate investors should consider seller carry back financing. Seller carry back can be offered for the entire sale price or just a percentage with traditional lending financing the balance. Oftentimes, seller carry back financing can expedite the sale of investment property. Additionally, it provides an alternative to buyer's unable to obtain traditional financing.
To determine the asking price on investment properties for sale or monthly rent payments for rental homes, be sure to include the entire cost of the investment. This includes the purchase price, closing costs, maintenance, repairs or upgrades, taxes, and other costs associated with the property.
Oftentimes, real estate investors overlook the big picture when purchasing investment property. Overlooked costs can quickly decrease projected profit margin, making investment property less valuable than expected. Therefore, it is crucial to stay within the projected budget and work with reputable contractors who complete projects on time.