Investing in real estate has its benefits–especially with low interest rates, the promise of cash flow, and the benefits of diversifying investments. But applying this simple advice can help you create the success you want.
You are making an investment. Evaluate on that basis. Remember the one percent rule: this standard rule of thumb says make sure the monthly rent you can get for the property is at least 1% of the purchase price. That adds up to a 12% annual return before expenses. After expenses, if annual return dips below 8%, it may be time to consider other forms of investment.
Don’t bank on appreciation
Never rely on past results to indicate future performance. If a house has been appreciating at a certain rate, it would be a mistake to count on that continuing; and that might cause you to overpay for a property.
Don’t confuse attractive financing with a good deal
Deals requiring little or no cash are not always a good thing. The trade-off is usually higher payments, which puts you in a tighter squeeze if the market softens. It also may be a means to entice buyers to purchase an overpriced property, which makes it less likely to appreciate.