You hear it from your friends, family, clients and colleagues; invest in residential Real Estate! Is this a sound decision and a profitable sector to place your money? With the proper due diligence and comprehensive analysis, I believe it is an excellent decision! History has proven that real estate has significantly outperformed most other investment markets. However, you must be aware and conscious of both the risks and benefits of owning residential investment property.
When we say “investment” Real Estate that is precisely how you should be viewing the asset - as an investment – and will this provide a desirable return on your money? In order to calculate this you must review all the monetary benefits associated with owning investment property. Not only for the obvious reasons (cash flow and appreciation) but you must also consider the equity being paid by the tenants, interest tax deductions, tax write-offs, expense write-offs, property depreciation and the fact that it is a tangible asset. Many people do not consider these ancillary benefits in evaluating investment property. However, these factors directly affect your personal position and the asset’s degree of profitability. Like other sizeable investments, you must evaluate your decision using a comprehensive analysis encompassing all of the elements. This is not an easy task, but with the right skills and knowledge you can generate this type of analysis facilitating the decision – Is this a sound investment and which option is best for me and the most profitable? In connection with this, you must also consider all the associated expenses related to owning investment property.
Like most investments, there are associated risks in order to obtain the associated benefits. With investment property you must consider the usual expenses in maintaining the property and the not-so-usual expenses you may incur. Routine expenses include mortgage payments, insurance, property taxes, maintenance & upkeep and utilities. In addition to these you must also assess the not-so-normal expenses. These include vacancy rate impact, replacement equipment, delinquencies/late payments, marketing/advertising, management fees, upgrading property to current market standards and in some instances damages caused by the tenant(s). These are real costs and must be considered in determining the investment’s profitability. This will not only affect your Return On Investment (ROI) but will also impact your cash flow. This is an extremely important point - Cash Flow - you must ensure your finances are in order so you do not experience a cash flow squeeze causing you to make distressed financial decisions. I have seen some clients in this exact situation and many times this drives dysfunctional decisions that are not in their best interest. With a little advice and planning, you can safeguard and prepare for these fluctuations. In constructing a comprehensive analysis you will be able to identify the risks and weigh them against the associated benefits. In most cases the benefits of owning residential investment property “significantly” outweigh the risks leading to an excellent return on your money.
Real estate investments can be one of the most profitable sectors to place your money. With a comprehensive analysis you will identify the property’s specific financial position and what you can expect for return on investment. Depending on how much money you want to put down and your respective financing, we are seeing on average a 30-45% return on investment including a monthly positive cash flow. Whether it’s generating an annuity stream, creating a college fund or preparing for retirement real estate investments are an excellent choice. If you would like to meet and expand on the information above, I would welcome an opportunity to visit with you.
Velocity Real Estate & Investments, Inc.
Phone: 970 214-5098