Investing In Real Estate - The Payoff

by : Alex Anderson

If you are looking for a quick payoff, then real estate property investment is probably not what you are looking for. But, if you are looking for a really good payoff in the long term, investing in real estate is worth the effort because, if done wisely, will avoid the ups and downs of the stock market.

Rental properties can provide a good income and become an excellent building block for your wealth. The type of properties for an smart investment would be single-family homes. Why? Because of the higher quality of tenant is why. These are the people that will take care of the home, and they are more stable and less vagrant.

There are several other reasons why single-family homes are better investments. The tenants pay the utilities and maintenance. The appreciation is better than on other types of dwellings, in other words, you are not tied into rental market like multi-family dwellings. The cash flow is more stable because you have longer leases. A house is easier to sell and easier to finance and easier to rent.

The types of residents that will rent their home are quite varied: Newly married couples, a newly acquired job brings in a new family or a promotion to a new area. It is wise to understand the area where you decide to purchase and it is even wiser to understand the quality of the renters you rent to. Bankruptcy or foreclosure victims need places to live, too, as well as those families whose credit is stretched to the breaking point.

The type of investment property you are searching to buy would be one that is the easiest to rent. Those would be homes with three to four bedrooms, two bathrooms with at least two showers, quiet neighborhood with a nice backyard and a good location.

These not only rent well, but also resell easily, too. You want something that you wouldn't mind living in: roomy enough, clean, updated, nice paint job with nothing too trendy either inside or outside.

In order to get a good payoff, you must consider your initial investment. You don't want to over pay because that will lead to less residual income from the rents due to a higher mortgage payment. If you over pay, you run the risk of not being able to recoup your investment when you decide to sell later or may result in negative cash flow because the rent is lower than the payment.

Another thing to consider is the larger maintenance issues such as a new roof or a new air conditioner. These are things that the landlord is responsible for and are expensive. If you purchase property that is unusually low in price because it's a fixer-upper, then you should include costs of repair to the cost of your initial purchase to calculate if your investment is wise. Building wealth through real estate investment property has excellent payoffs over the long run.