Real estate investments are among the most popular in any kind of investment portfolio. It is a well-known fact that property values do not go down unless there are catastrophic economic conditions. Simply put, investors can rely on their property investments to earn consistent returns.
However, this does not mean property is always a safe bet. Investors need to understand when and where they can create an exit strategy. This is important because prices are always fluctuating and implementing predictive market investment policies are the best way to derive maximum profit for investments.
Broadly speaking, the entire ambit of property investment is massive. So, it is impossible to provide insights into every niche. However, there are some key features which are shared by all niches and they can be implemented with some modification across the board.
Cardinal Rules for Making Profitable Real Estate Investments
1. Buy Low, Rent Smart, Sell High
This is the most elementary and also the most widely applicable bit of advice for all kinds of real estate investors. Buying when rates are down is the best way to enter the market. Usually, the real estate market sees periodic bullish and bearish phases. In these conditions, it is important to understand which investments to liquidate and which to continue investing in.
Different market niches act differently even though they have a relatively common link in government policies like housing, industrial property, leasing and taxation. So, investors need to create a smart entry and exit strategy which can yield them a high return on investment.
For novice real estate investors, there is nothing more important than networking with other investors and understanding the law of the land. There are plenty of ways in which one can do this. The easiest by far is joining an investors club.
Individual investors are unlikely to have the market insight, analytical ability or even resource data access to make informed investment decisions. Joining a club can educate them on the broad scale trends in the market and get them into the technical side of real estate investing.
3. Aim for Financial Independence
When undertaking any kind of investment, your investment goals need to be well-defined. If you are investing simply to explore the market, then you can take on less risky assets. However, if you want to acquire a comfortable income which can sustain a relatively high standard of living irrespective of market conditions, then you will need to make strategic investments and bear calculated risks.
Achieving financial independence is a result of diligence in the real estate market. It is predicated on being able to posit trends in the market through regular exposure. Investors who sit on their assets for too long run a big risk on losing out. So, real estate investment demands a regular and thorough insight into the market.
4. Hope for the Best, Plan for the Worst
The main reason the real estate market is able to provide tremendous returns is because there is a lot of risk involved. In fact, the high risk, high reward ideology is applicable in the real estate investment market better than anywhere else. So, this means investors need to be circumspect about where to put their money.
Naturally, there needs to be a complete and well-defined investment plan which also needs to evolve with market dynamics. At the same time, smart investors should look to make contingencies so that they mitigate the risk they are bearing. This will ensure that in the unfortunate event of a loss, they can salvage a reasonable section of their investment.
5. Investment and Lending Can Be Done Together
Real estate investments need not be the only kinds of money you put into the market. You can also consider entering the lending market. The idea is to not just wait for opportunities to provide investment capital but to become the principal lender. This method of making money on the market is arguably more rewarding but also carries out greater risk. So, a proper due diligence protocol is advised for such parties. For lending investors, finding a deal becomes more important than creating one as and when the need arises.
Developing a strong real estate portfolio takes time and effort. Understand the market, make your investments, learn big from smaller investments, have an adaptive investment strategy and take calculated risks. You will end up with a strong portfolio is some time.