Tips on Buying Real Estate for Rental Income


There are five basic types of real estate investments properties:

  • Residential – single family homes to rent or rollover

  • Commercial – Apartments and office buildings

  • Domestic vacation – In the US: not just traditional, like Florida and California, but housing near sports areas and lakes

  • Foreign vacation – A world of possibilities in vacation spots

  • Raw land – Well-chosen land can be more valuable than gold if and when someone wants to move into it.

The foreclosure terror is over; there is a silver lining.

Arizona, Florida and Nevada were hit very hard by foreclosures over the past few years. California, which was also hit, had 56,913 foreclosures in a single month (July 2011).

While this has been unimaginably painful for the families that it affected, it leaves an opportunity for those looking to invest in residential housing nearly anywhere in world.

Investments in large cities that were hit hard are almost assured to make money for an investor. Las Vegas, Indianapolis and Phoenix will still be destination for business and residents, making purchases in these cities profitable in the long-term. Renting these homes to people moving into town can help to generate revenue, particularly as they can be purchased at prices that will allow the rent to be very reasonable. Other cities that appear ripe for great investment include Oklahoma City, Orlando and Ft. Lauderdale (FL), Bakersfield and Stockton (CA) and Boston. Each of these places has seen significant foreclosure activity and have many homes available on the market are great prices.

The Five Keys to Smart Investing:

1) Only invest in what you know – Don’t invest in fields that you aren’t familiar with. Make your decision on what you know and what you can learn.

2) Keep looking around – Look around you. Your area is the best place for you to spend your investment money.

3) Choose the right plan – Find the right way to pay for the property. There are dozens of financial investment plans. This would be a good time for professional advice.

4) Get your ducks in a row – Make sure that you have all of the financial issues arranged and ready to jump as soon as an opportunity appears.

5) No investment is an island Find the right professional advice to help you. Even the greatest real estate investors have a team to help them make the right choices and have everything in place.

Ignore what they always tell you about what you should do for your investments. The strongest investors have 50% of their money in real estate and 50% in bonds and equity.

19% - The Magic Number

That’s the average annual ROI on rental property. The average stock portfolio only returned about 10% annually over the last 25 years.

Three Easy Steps to Investing in Real Estate

1 – Set up a self-directed IRA – Take control of the funds in your IRA. This might not work if you are planning on needing your retirement money right away, but it can work great if you have some time.

2 – Roll retirement funds into the IRA – Be sure to consult a professional on how to do it well, but it there should be little of no tax consequences if this is done properly.

3 – Buy the property you want – Make sure that you have considered every angle of the investment and are reasonably sure of a solid ROI. The first time might be a bit scary, but you will be fine. Just make the best decision you can and don’t over-reach.

It’s all that simple! (It is easy if you plan well and make sure you have good advisors.)
Posted on Apr 30, 2013


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