What Is the Best Type of Property to Buy?
Investing in real estate properties warrants the consideration of a range of options. Knowing which types allow you to achieve what is essential to the long-term success of your real estate investments is critical. In the following, we will explore, at a high level, your options for what type of real estate to buy.
Table of Contents
1. Long-term vs Short-term Rental Properties: Investing with a Strategy
Real estate investing is a means and not an end. Like investing in the stock market, the goal is to average down and bounce back up. In contrast to the stock market, the goal is not to buy low and sell high, but to buy low and buy more than you paid. Short-term rental properties enable you to achieve this goal. In this instance, you are making an investment with the goal of having a tenant in the space for a maximum amount of time and then reselling it.
This may sound contradictory, but when you consider the long-term investment strategy, it makes sense. As you are managing and paying the expenses of the property, you are earning equity that you will eventually be able to use to buy your next property, hopefully with a profit.
Ultimately, this type of investment is ideal if you are looking for short-term gains and a quick turnaround. Think of it as a way to increase cash flow and build a stronger bottom line.
2. Opportunistic vs Targeted Real Estate Investments: Know What You Are Dealing With
When it comes to investing in real estate, you will usually deal with two types of investments: opportunistic and targeted. Opportunistic is when you have no idea of what you are going to buy next, and maybe not even where. Essentially, opportunistic investing is about the numbers and investing in a place that has the most favourable numbers for you.
Targeted investment is when you are specifically working with a team to buy a property that fits a specific purpose or that has a realistic cash flow. In this case, you know the property, how much you’re going to spend, and where you will be putting your cash flow.
In short, opportunistic investors have a desire to make money; targeted investors make money to achieve other goals and problems. Both types can make a great investment strategy if executed correctly.
3. Risk vs Reward Real Estate: Calculated versus Engaged
Risk and reward are two sides of the same coin. The ideal real estate investment provides a positive outcome for both. In real estate, the best way to have a positive outcome from your investment is to protect your investment before you make it. Of course, the goal is to make money, so how much risk should you take? The answer is, how much risk can you handle?
Risk is calculated based on how much will you be prepared to lose if the investment doesn’t go as planned. There are several important, and sometimes unexpected, factors that should be considered when you’re making this investment. For instance, what will happen to your investment if the vacancy is excessively high, the property itself has an unexpected higher cost of maintenance, or the location ends up falling out of favour?
Risk and reward, of course, are tied together. The higher the risk, the more you make. The lower the risk, the less money you make. Just make sure when you’re calculating the risk that you’re considering the right factors.
Investment in property warrants the consideration of a range of options. Knowing which types allow you to achieve what is essential to the long-term success of your real estate investments. But often you will find yourself in a position of being unsure whether you will achieve the right level of investment. And sometimes you might even find yourself under legal pressure because you don’t have enough knowledge of what you are doing. Find a solution to a real estate litigation problem and get the right guidance from experienced professionals to deal with your real estate matters.
The real estate market is complicated, twisted, and full of unknowns. Any move you make can lead to an amazing profit or an expensive mistake. A real estate problem that you might not be able to solve alone can be a life-changing experience. That is why choosing the right attorney to help you is one of the most important decisions you’ll ever make.