Investing in real estate can help you make a quick buck if you choose to flip the property. But, smart real estate investments have the potential to bring in lucrative, long-term, passive income. Finding these types of investments requires some research as making really smart choices from day one. Remember that your goal is to make as much rental income as possible. So, here are some tips to help you choose smart investment property to help you do just that.
Fair Return on Investment
In order to purchase property, you’ll need to liquidate various assets. These may include IRA, CDs, bonds and stocks. But, you need to make sure that your real estate investment ROI is higher than what you were already earning from these liquid financial assets.
To accomplish this, you’ll need to receive a return with a fair cash-on-cash value. So, make sure the property you invest in comes with a positive cash flow. This means that the rental income minus all property expenses should equal out to a fair return on your investment.
Not Too Risky
Savvy, experienced investors can generally afford to take major risks when investing in real estate. For others, however, too much risk can mean losing your entire investment, earning a 0 return. Some extremely risky types of investment real estate include: fixer uppers, high crime neighborhoods, areas prone to major natural disasters, etc…
So, until you have the capital required to cover the costs of investing in high risk properties, consider taking a safer route. Do your due diligence and research the property you’re interested in before investing your hard earned dollars into it.
Low Maintenance Required
Some real estate investments require very little time to maintain. Others, however, require more time and management than you can imagine to transform them into smart real estate investments. These high maintenance properties include: college rentals, real estate in low quality areas and vacation rentals.
Until you’ve added a bunch of investment experience under your belt, try sticking to “nice, boring real estate” for now. To be considered smart real estate investments for beginners, they must be in good shape, and bring in positive cash flow. So, be sure to do some research before making the investment.
The Cost of Ownership of Smart Real Estate Investments
When calculating the potential cost of ownership, be sure to factor in the following expected expenses:
- Mortgage payments
- Real estate taxes
- Property insurance — generally higher for rental property
- Cost of vacancy — 10% vacancy rate allowance recommended
Some other costs related to owning real estate you plan to lease to tenants include:
- General upkeep
- Capital improvements
- Painting, cleaning and other costs related to tenant turnovers
When calculating the cost of ownership related to property upkeep, be sure to include the costs of professional labor and materials, as well as the time it takes to maintain the real estate. That means that if you invest in a fixer upper or run-down piece of property, excessive money and time will be require to update it.
To cut down on the amount of time you spend maintaining the property, hire a professional property management company. The company will help keep the property occupied with qualified tenants while keeping it maintained in a professional manner. Although the 5–20 percent of your rental fees they’ll charge will cut into your ROI, it may be worth it if your time is of the essence.
Park City Smart Real Estate Investments
In Park City, Utah you’ll find very smart real estate investments with potentially high returns. Home values are high in comparison with the rest of the state, making this a prime city for investing in rental property.
Ready to check out investment property for sale in Park City, Utah. The Realtors at Jensen and Company are experts in the Park City real estate market. Contact Jensen and Company to schedule an appointment to view local property for sale today.