There is an old saying if you aren’t using your money to make money you are losing money. The same goes in the world of real estate. If you aren’t making your money work for you when making an investment in the real estate world, then you are throwing money away. In real estate, there should always be a positive cash flow. If you want to ensure that an investment will be profitable, you have to do the following six things.
1. Avoid those things that won’t general rental income
If you want to invest in real estate, the only way that you are going to increase your capital is by finding something that will generate rental income. Whether you are considering a second home or property, the only way that it is a smart investment is if you can generate income from it. When buying a vacation home, you have to look at it as an investment. You can’t be there all the time, when you aren’t, you should let someone else pay the mortgage on it.
2. If it has a negative cash flow, it isn’t smart
If you want to buy a luxury condo or prize beach house realize that it may be twenty plus years before you get any return on your investment. If you are buying it to impress your friends and family, then go ahead, but if you are considering it as a real investment, the chances are that it just isn’t.
3. Tenant-in-common arrangements are not solid
Although popular from 2005-2007, they are now nothing but trash investments. The allure was that the investment ended up making a great show on your portfolio and you didn’t have to worry about taking about a mortgage or managing anything. The problem is that there were few people who ever really made any money from investing in these types of arrangements.
4. Stay away from things that are yet to be developed
Investing in things that don’t exist is always a risky proposition. For the average investor, pricing risks, construction and entitlements issues, are way too risky. That is why most of the commercial development investment are attributed to by those who have a lot of capital to lose. It can you make you very wealthy, but in the reverse, it can make you poor too.
5. Don’t try your hand at foreign affairs
Don’t try your hand at an exotic hidden gem in another country. Global economies can be very uncertain, which can leave you with a whole lot of risk. There are also things that you probably won’t anticipate for like currency fluctuations, exchange rates, and real estate law differences.
6. Stay away from time-shares, condo-hotels and interval habitation investments
This probably does need to be said, but just in case, these are all negative cash flow investments, and you most likely won’t even get to enjoy them yourself.
To make money in real estate, you have to be really considerate of all factors and have positive cash flow from it. If you want more advice on how to make your money work for you, contact Blue Jay Equity. Experts in the field, they will help guide you through the complexity of investing in real estate.