The main objectives of any real estate investment are appreciation, cash flow and tax savings. Investing in rental property is the only property investment that gives you all three of these benefits at the same time.
The main categories of rental properties consist of single-family rental properties, multi-unit residential rental properties, commercial rental properties, and vacation homes. The first category includes long-term single-family rental, the second category includes apartments, multi-family buildings, while the last category includes shopping malls, office buildings, etc. for a long term rental purpose. Here are other points to consider with real estate investments:
1) Methods like foreclosures, ugly houses, and probate houses are useful for buying property. Lease purchases can be extremely helpful, helping you to leverage investment dollars and achieve positive rental cash flow. Buying superior homes to fix or repossessions can help reduce investment dollars and improve cash flow and appreciation.
2) You cannot expect substantial cash flow from the property with one tenant. In this case, the main objective is to cover the mortgage and current expenses.
3) Research on a potential rental home should include significant financial planning for years to come, such as property management, repair, vacancy, emergency, etc.
4) Apartments and 2-4 unit homes are the main classes of multi-unit residential real estate investment.
5) With apartment investments, the main gain comes from rental cash flow. A lease-purchase option and leverage of the investment money is very helpful in this case. The most significant factors in this case are the financial evaluation and the administration of the property. With a steady cash flow from multiple tenants, it is possible to hire a manager to manage the property. Helps increase cash flow and the value of the apartment building. Underestimation can damage the investment and cause losses.
6) Investments in commercial properties include office buildings, retail shopping centers, industrial properties and the like. The market value of these properties is decided on cash flow (net rental income). The main purpose of the rental in these cases is to generate enough cash to overcome the cost of the mortgage, insurance, maintenance, future improvements. This is not an easy task to handle. It requires the analysis of many things. But if done correctly, it could prove lucrative. Changes in economic conditions tend to have a more pronounced impact on this type of real estate investment than on residential real estate investment. And because office buildings and industrial properties are more susceptible to these changes, it’s wise to hold additional capital to support those investments if something doesn’t pan out as expected. In this case, a leveraged-money approach (lease-purchase option) is very helpful.
7) A vacation home can be used in two ways. It can be a home ownership or an investment property. This category includes resort properties, mountain houses, or beach houses. With vacation rentals, the main benefit comes from appreciation. The cash flow generated from the rental is typically used for ongoing expenses like property management, mortgages, and insurance. These are short term rentals and require heavy maintenance.