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What type of investment property should you look for?
First, remember this is an investment. As such, you need to get the best possible return on the money you have invested. What is an acceptable rate of return for you? 5%? 8%? 10% or more?
Once you make that decision, you need to decide how much risk you are willing to take. Does the conservative approach of buying a property and holding it enable you to sleep at night? Or are you more of a gambler? If you are, fixing and flipping could be right up your alley. Both have their advantages and disadvantages.
You’ve decided what rate of return you want and how much risk you are willing to take. Now you need to decide where to invest. There is a reason behind the old real estate chestnut of “location, location, location.” The better the location, generally the better return on investment. It is far better to have a “down at the heels” property in a great neighborhood than the best house in a lackluster area.
Generally, pick a neighborhood or area that you are familiar with. If you want to invest in a different area, become very, very familiar with that neighborhood. Find out what properties are selling for. Figure out how long it takes to sell and what type of amenities most homes have.
Here are some suggestions:
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Buy an investment property with a 15 year note whenever a child in your family is born. College will be paid for whenever he or she matriculates.
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Invest in properties near schools, especially college campuses.
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Know that your internal rate of return will depend on how much rish you are willing to take.
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Work with lenders to finance your investments. Remember, with an IRA you must use a non-recourse lender.
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Buy investment properties with 15 year notes.
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Single family homes pose the highest risks to investors because if they become vacant you have lost 100% of your income. A three or four unit investment is much safer.
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