Some like to invest close to home, will not even leave their neighborhood. Others will venture outside the box, their state, even their region or country. There are some things that are very important when looking for deals. The biggest mistake new investors make is to purchase their first investment property at market value and hope for appreciation. This is called speculation and I do not recommend it at all. Furthermore, these mistake prone investors usually follow the herd and purchase when markets are high. Now who has heard of Buy Low, Sell High?
Following the herd can get you in trouble. In fact, some of the most successful real estate investors do exactly what the herd or the masses are not doing. At Real Return Real Estate™ we recommend doing the opposite of the masses such as Buy right now while everyone is Selling. But, we back it up with tons of research to find High Return deals with Very Low Risk!!
1. Affordability – If a market is not affordable similar to how much of the West and Southeast became during the peak, you are likely buying High and could see some crippling depreciation. PMI has incredible research and information on market affordability and probability of depreciation.
2. Rents – A good cashflow deal is when rents are 1% of purchase. However, we at Real Return Real Estate™ often find deals with 2-3% which are tremendous for cashflow and significantly improve return and minimize risk.
3. Purchase with Equity – Purchase with at least 30% equity or 70% LTV. We at Real Return Real Estate™ focus on 50% equity.
4. Have Backup Plans – Multiple exit strategies significantly lower risk. While selling at retail when the market is high, it is often not realistic. Make sure you can sell to investors, wholesale, refinance, rent, hold and/or lease option.