Investing in Real Estate
Real Estate investing in the past few years has been more of a speculative in nature than in the past. With the easy access to capital combined with low interest rates provided a foundation to see significant appreciation in real estate values in a much shorter time frame than we had seen in the past. The principals of successful investing include: Due diligence, proper understanding of location, cash flow, realistic expectations and the avoidance of greed and over leverage. If you follow these principals you should make money more often than not and also have a positive real estate investing experience. With MN first time home buyer assistance will also help
The rule of thumb is real estate values typically follow GDP in appreciation, so when we were seeing returns of 10%+ that are more typically found with stocks you can see that the correction was not 100% unlikely to happen. We didn’t pick the top and will most likely not pick the bottom but, understanding the cycle is still key to success in real estate investing.
The core of successful investing in real estate is understanding cash flow and leverage, we are now still in the downward pricing cycle of real estate but, that is providing great opportunities to investors that are patient and are willing to work to find deals that are cash flow positive. There is a difference in cash flow positive and just covering your cash flow of the investment. With the prices dropping you are now able to find rare opportunities to invest in real estate. We suggest to our customers to find homes or buildings that have a unique feature or location that makes it more valuable than the others in the area. Look for property near water, resources or even large multinational companies that have a large local presence in the area. Check the demographics to make sure the city is growing not shrinking, the age of the residents is lower not older, unless you are investing into assisted living facilities.
These are some of the techniques we use to make sound investments in real estate and we think that these principals will provide better returns over the long term than we have seen in the past several years. We understand there is no guarantee in investing but, if you do your homework and proper due diligence and at the same time avoid greed you will avoid many of the pitfalls of the past real estate investing cycle.