Most of us have considered buying investment property at some point in our lives. Unfortunately, a lot of people never take the next step. What prevents financially qualified people from taking the next step? For a lot of people it comes down to being afraid to take the necessary risks.
Buying Investment Property is a significant financial decision. It involves a legitimate risk. The investor may or may not lose money. There is no guarantee that the property will turn out to be a good investment. Uncertainty leads to indecision which results in no action being taken. As a result, a potential investor never pulls the trigger on buying investment property.
Buying Investment Property Risks
The old saying of “nothing ventured, nothing gained” has never been more true than in real estate. Investors who sit on the sideline waiting for the perfect opportunity to buy investment property will be stuck sitting there for the entire game.
Yes, there are a lot of risks involved in buying investment property, but with risk comes reward. I’m not suggesting jumping straight into real estate investing without doing adequate research and due diligence. I’m merely stating that it’s impossible to reach an investment goal without taking the first step.
Nobody will ever know everything about the market, regardless of how much they read. Those who know the market well enough to make a significant return on their investment got to where they are by immersing themselves in the real estate market. It can be scary to take that first step, but once someone commits to taking it, there is no better feeling.
Getting Started in Property Investing
Once the commitment to make the first step has been made, it’s time to decide which type of property meets your criteria.Buying investment property is not as simple as simply picking a piece of property that has good cash flow. The investor needs to set investment goals before looking at properties. Without a set of predefined goals, the real estate market will seem overwhelming.
Setting goals for buying investment property involves determining the amount of return you want to achieve and the amount of risk you are willing to take. Unfortunately, an increase in risk is generally required in order to get an increase in returns. It’s essential that investment goals are realistic and attainable. Thorough research will allow an investor to see what kind of returns are available in their market.
The amount of work that must be done to the property and how management intensive the property is will play a role in determining the cap rate (return on investment). This applies for both commercial and residential properties. Both types of property can offer good returns on an investment. Commercial real estate typically has the potential to generate larger returns. However, it also involves much larger risks.
For those new to buying investment property, residential real estate is usually the best place to start. With residential real estate it’s easier to stay local. Staying local with enable an investor to know the area where they are buying investment property. This gives the investor intimate knowledge of the area. Knowledge of the area lets an investor be much more comfortable with their first investment property.
Buying Investment Property in Commercial Sector
Investors who are looking to make a larger investment should consider commercial real estate. Generally speaking, commercial real estate involves larger sums of money and increased risk. The nice thing about buying commercial real estate is that there are a lot of options available. Investors thinking about buying investment property in the commercial market should consider triple net lease properties, also known as NNN Properties. These properties offer a relatively secure return on investment.
Regardless of which type of property an investor chooses to buy. The most important step is to commit to buying investment property. Without committing to taking that step, it is much more likely that the investor will fail to invest in real estate. Get started today. Buying investment property is a great way to build long-term wealth.