Is Real Estate a Good Investment? You Bet!

Real estate can be a lucrative investment when purchases are well executed. Investors have been noticing large returns as a result of several income streams coming in, and with the right plan of action you can see yourself get the same results.

Here are some elements to look at when decided whether to invest in a piece of real estate:

1) Appreciation: The appreciation of rental properties has a direct correlation with inflation, meaning that as inflation increases, so does the value of the property. Increased value can lead to higher sales and reinvestment, or at the very least it can give an equity line of credit that could be put toward other investments.

2) Inflation: Because the cost of rent increases with inflation while mortgage payments remain the same, inflation is good for renting out property and can lead to increased income for you. An increase in inflation can also lead to a larger number of renters due to the fact that purchasing a home may be an option for fewer individuals. Because the amount of demand will increase, the cost of rent may increase, as well.

3) Yield: Calculated as either net or gross, the rental yield is the percent of yield from the direct rental income. The net yield takes all costs (including taxes) and divides it by the value of the property. This is the calculation that’s preferred by investor experts, and it does not take mortgage payments into account.

4) Leverage: You will get better returns if you use leverage and are careful to find properties with good rental yields. By using a certain amount of money to put down payments on three properties instead of putting it all toward one, you can greatly increase your return. However, be sure to take the risks into consideration before jumping into this option. You will need to be sure that you’re able to find renters for each of your properties.

5) Improvement: Quite a few investors will purposely buy properties that lack certain features, with the intentions of fixing them up to increase their value. There are many homes that have great potential, but simply need some work done. If the value of the home after renovations will exceed the cost of the renovations, then it’s a worthwhile investment.

Investors have been known to use one or more of these factors to increase their chances of having a large return on their properties. All five can be excellent options for real estate investing, but be sure to do your research before beginning your endeavors. Once you take the economy, your local real estate trends and renovation costs into account, you could end up a wise investor yourself!