What Three Things Make A Great Real Estate Investment?

Investing in real estate involves a lot of considerations, but in this post the experts at Zillow have distilled it down to the top three things that make a good real estate investment: return, risk, and effort.

The Investment Pays An Acceptable Return

At the top of Zillow’s list is the return the investment offers: is it good enough? After all, author Leonard Barron notes that:

…you are taking money out of your liquid financial assets – stocks, bonds, CDs – and investing it into a very illiquid asset – real estate.

Your liquid assets were paying in the area of 4% – 6% returns, so you need a fair cash-on-cash return. Mr. Barron recommends: “cash flow-positive properties that earn you decent returns – not those prize properties that are negative, negative, negative”.

The Investment Isn’t Too Risky

First, real estate investment is risky. Period. But, Barron says, you can manage risk by eschewing invesments in:

Tenant-In-Common (TIC) [properties], private real estate funds, fixer uppers, etc…

He notes that “all have much higher risk profiles than just simply buying a nice established cash flow investment property”.

It Doesn’t Require a Lot of Your Time

Some properties simply take more care and feeding than others. Barrons cites “…vacation rentals, low quality properties in bad areas, [and] college rentals” as great examples of properties that require “way too much time and management to make them smart investments”. To this he adds:

In addition, treating your tenants fairly and with respect goes a long way towards keeping good relations with them; and reducing your hassles when there is an issue you need to address. And believe me — there will be issues!

At the end of the day, it takes planning and hard work to make real estate investments pay off. And, there is no substitute for having a trusted, expert advisor in your corner.

Read the entire post here.

René Nelson and the team at Pacwest Commercial Real Estate specialize in all types of commercial and investment property. Get started by calling René at (541) 912-6583 to discuss your investment goals and to help you find the perfect property!