Putting your money on an investment property sounds frazzling, especially for newbie investors. Unlike other types of income-generating ventures, real estate financing typically requires a substantial amount without guaranteeing quick returns.

For instance, if you choose a rental property, you’d have to wait for several years before getting a return on investments (ROI). On the other hand, real estate investments can be profitable if you know how to make the right decision. Find out how to determine whether an asset has high-income potential or whether it’s a minefield.

1. Define Your Investment Purpose

As with other types of investing, buying a real property has accompanying risks. That’s why it’s best to take your time and determine what you wish to achieve in infusing capital into the sector. For instance, if you want to invest with minimal money and potentially stable but equally low returns, consider real estate investment trust (REIT). A rental property may be best for persons who are about to retire and want a steady income. Setting clear objectives can help you find the ideal investment method according to your capacity, needs, and investment goals.

2. Know The Common Features Of A Profitable Real Estate Property

Whether you’re planning to purchase a move-in-ready rental property or buy a fixer-upper and re-sell it at a higher price, you must be aware of the following common elements of a potentially high-yielding asset. Here are some of them:

• Location: It’s true what they say; location is everything in real estate. While some may disagree, experts often recommend investors make this their top priority. Indeed, location impacts a lot of crucial factors, such as rental price and the kind of tenants you’ll attract. Rental property in the city is expected to sell like hotcakes, but living in suburbs is always preferable to families and professionals looking to own a home.
• Neighbourhood: The community is also a good indicator of real estate property prices, especially homes. If you choose one near factories or undesirable places, such as a cemetery, expect to buy low and sell low too. The same holds for localities with high crime rates and zones prone to natural disasters.
• Future developments: Before investing in a real estate property for rental or re-selling, check the local roadmap and see whether the area of your choice is being primed to become the next economic hub. This element is often overlooked but critical in estimating property value down the road. Future developments can also spur employment and, therefore, high demand for rental properties.
• Amenities: Properties that offer access to important places, such as hospitals, shops, schools, and public transport command higher prices than counterparts in distant areas.
• Average rent and cost of living: States have different living rates, which largely dictate rental prices. Check the current and historical property prices in the area to analyse the trends.

For online real estate investments, such as REITs and real estate crowdfunding, the categories for profitability are different. REITs are often traded on the stock exchange, so you can check the company’s performance history before parting with your money.

On the other hand, crowdfunding is a relatively new investment option and may be riskier than REIT investing. The venture starts with an experienced real estate developer who pitches a commercial real estate asset needing additional funding to increase its value significantly. Instead of funding the project themselves, these developers ask interested investors to pitch in, in exchange for equity interest.

3. Develop A Search Criteria

These days, it’s so easy to access real estate property listings, choose online real estate investment platforms, or contact real estate investment brokers. However, investing blindly is never a good idea. After selecting the ideal real estate investment strategy for yourself, make a list of must-haves and negotiables. Generally speaking, though, never spend your money on shady investment activities. This is true, primarily when investing online, where you may not get proof that you’ve infused capital on a particular company.

For physical investment, such as house flipping or rental properties, keep in mind the criteria mentioned earlier. It helps if you invest in the same locality or nearby state, where you can quickly drop by to check on your asset.

The Bottom Line

Finding profitable real estate investments requires skills and instincts. Besides learning how the real estate market works, knowing the standard features of a gainful property is vital, as discussed in this article. A rookie capitalist can spot a good deal and jump at it before another investor takes the opportunity away by keeping these points in mind.

Ultimately, an investor must keep their projections realistic and make sure to diversify their portfolio to weather the risks of a market downturn.