What exactly is an investment property? How do I make money with an investment property? What type of property should I buy? How do you calculate your returns on an investment property? These are all good questions, let's see if we can answer them with some examples below.
You can buy an investment property to hold on to in your family for generations or you can buy a property to fix up and then sell - or flip. An investment property can be a way to make money in the long term or short term or both. But the overall concept of an investment property is to make money via renting out the unit to tenants and make money through their payments in the form of rent. This is an income generating property - this is cash flow.
If the value of the property itself increases - appreciates in value, that's just the cherry on top of the an ice cream sundae. The key is to earn money from rent each month that exceeds the amount you have to pay on the loan or money you used to buy the property.
Below are some examples of a range of investment property purchases according to type, from condos to TICs to single family homes. These investment property examples will help you better understand just what buying an investment property entails and how you determine your ROI or Return on Investment.
Click on a link below to see examples investment property deals.
By analyzing other people's real estate deals you can make better decisions and learn how to make solid real estate investments that will give you good cash flow and a strong return on your investment.
You'll learn: what type of analysis was used in the example, what return on investment the buyer can expect, what they saved via tax deductions, what's the rough appreciation and cash flow they can anticipate in the future, what type of loan they used, how much they put down, and so on. We've tried to work out example deals of a wide range of investment property purchases to help you make better decisions when you buy an income generating property.
If you're a new to investing in real estate it's wise to buy a smaller property that doesn't require much management or risk, say a duplex or a townhouse, or a single family home that you plan on living in for two years.
Although you can learn a great deal from taking a closer look at these real estate deals, you'll learn the most from actually investing in property and getting started. Initially this could just be asking questions of an agent or looking at property. Overtime, you'll come to recognize the good opportunities.
For each property, let the fundamentals of good real estate guide you. And by this we mean, location, proximity to good schools and restaurants, who's going to rent this type of property (who's your target demographic), what's the outlook for job growth in the area and is the current job market stable and paying good wages. Obviously, you don't want to buy a property near a factory that is going out of business or one that's polluting the surrounding enviornment.
What's the proximity to public transporation or freeway access--sure this all depends upon the type of property you're buying but if there's something the distinguish your property from others then that's a strong selling point. Vacation type properties aren't concerned about some of the above factors like those living in city apartments might be.
Underlying all the factors and questions you have to ask, have a strategy that works for you. Do you buy apartments near colleges? Do you buy property that's unique in terms of being in a well know area or has a recognizable name, say buying near the beach or near a ski resort? It helps to have an underlying plan that you know and have experience with.
Learn more about different types of properties you can buy.