Choosing the Right Real Estate Investments

It may be hard to know which properties to invest in when you are first starting out in real estate. You know the money is there to be earned, but sometimes it is hard to determine if the money is worth the risk. The answer is yes. You can make a great income if you are choosing the right real estate investment. There are simple ways to determine if the investment is a good one.

The first thing you must consider when looking at a distressed property is what the market value of the property is. This is not the appraisal value. The appraisal can be wrong. Just because the paperwork says the property is worth $175,000 does not mean you will get that price on the open market. The market value is what you can actually sell the property for. This could be thousands of dollars less than what the appraisal actually says. To determine the market value, speak with a good real estate agent, who is familiar with the area you are looking to purchase your property in. Find out what comparable properties have been selling for, not what they have been listed for. You need to know what the selling price of the other properties have been in the past six months, the asking price is not important. There was a time when it about a year ago when asking price was important, but times are changing. You need to know the market for the past six months. This will give you a good idea of what you may be able to sell the property for.

The next thing you need to know is how much equity you could get from the purchase. For instance, a home appraised at $175,000 but with a market value of $150,000 would not be worth buying unless you can get it for $130,000 or less. The reason for this is because there could be a fluctuation in the market making it difficult to sell the property. You will want to make sure there is enough equity in the home so you could still generate a positive cash flow out of the property if you have to sit on it for a few months. Although this is something which every investor dreads doing, it has happened more often than most will admit.

Another thing to consider when choosing the right real estate investment is how long properties in the area are on the market. You do not want to purchase a property which will be on the market longer than three or four months. Never buy in an area where sales are taking six months or longer. This usually is a good indication of a declining market, where the property values are falling. You want to find a prosperous neighborhood. This can be done by simply researching the job market and new construction in the area. A high rate of employment and new homes or buildings going up indicates a growth. Finding a distressed property in these areas is a real treasure.

Choosing the right real estate investment also means knowing what is in demand. You can do this by simply running an ad in the local paper offering homes for sale. People who call can be asked what types of homes they are looking for. You can tell the potential buyer you have something you would like to show them, or you can take their name and number for later contact. This does two things. It tells you what people in the area are looking for and it gives you a list of potential buyers. You can then find properties these buyers may want to purchase. This can insure a quick sale on just about any property you look at if you have gathered enough names. In other words, finding a property the buyers on your list want means you are choosing the right real estate investment.