Is investing in Real Estate a good or bad idea? Part 2/3
As we mentioned in our previous installment, “Is investing in Real Estate a good or bad idea?” now, we will explain some of the points you should consider to be successful in your real estate investments.
1. Draw your Goals and Objectives
Before investing, define your goals, both in money and in the investment itself.
That is to say: set a possible income goal and the number of investments your portfolio will have.
For example: “I expect my investments to earn $20,000 dollars a month in five years”, this, having at least three real estate properties.
As you will see, these are concrete and realistic goals within the Florida market.
2. When Investing in Real Estate: Be Willing to Take Risks
As we mentioned, although the risk is low, it does not mean that we are free of dangers.
But these can be controlled. We must be responsible and not jump into the void, but rather seek professional help as a way to learn and move forward.
This way you will not take risks in every investment, you will lose the fear of investing and you will be able to see new investments that will allow you to increase your profits even more.
For example: If you acquire a property of 4 studios to rent it to young professionals, and you hire a company to manage your property, and that guarantees you that it will always be rented, in a short time, the rent of your investment, will allow you to acquire a new property, and so on.
By daring to reinvest the return of your money, acquiring another property when the first one is working, you are assuming a new controlled risk, which will be reflected positively in your pocket.
3. Type of Investment to Make
In real estate it is convenient to know which investments to make, according to the market conditions, we would recommend you:
- Apartment buildings
- Small hotels
Investments that generate income under the operating lease scheme. But, when it comes to investing, if you have doubts, getting advice from a real estate expert can be key.
4. Evaluate Risk-Return-Volatility
Risk. Not all investments have the same risk.
Buying a duplex house in a good neighborhood will be less risky than buying an office, for example.
This is because for the house there will almost always be clients, while offices depend on the good health of the economy, the return to normalcy and the boom of work from home.
Return. The rate of return depends on each case. Following the example, the rental price of an office should be higher than that of a house.
In this sense, its return should be higher, because its risk is higher.
Volatility. The risk is marked by volatility, since the success of this investment depends on external factors such as the number of companies and their business models, (but not every company needs offices to function).
Always ask yourself how much risk you are willing to assume, based on the return you expect and taking into account the volatility you can tolerate.
5. Extra expenses may arise when investing in Real Estate.
There will always be passive investment, but you must put time into your investment (even if you hire an operating company).
Keep in mind the maintenance that your property will require over time.
Never fail to consider these aspects, if you don’t, it will affect your chances of success.
In our last installment we will explain you the points to apply on your real estate investments.
Like always if you need any advice or have any questions, please call us (305) 930-1160 or visit us at 605 Lincoln Rd Suite 250, Miami Beach FL 33139.