Investing in Properties: Good and Bad

Buying an investment property is a major financial milestone. It offers many benefits and rewards. Cash flow can be derived from a number of sources such as rent and appreciation of value. However, not every property is the same. More over, no two houses are alike and some are better suited as an investment then others.

Before committing to an agreement, detailed researched needs to be done on the condition of the property and its surrounding neighborhood. A badly conditioned house can turn your investment sour really quickly. Outside factors, such low crime rate, easy access to transportation and good schools increase property attractiveness exponentially. Municipality taxes and local utility expenses have to be factored into a decision as well. Extra expenses decrease your bottom line and profit margin.

Other risk factors have to be considered as well. The current state of economy and rent market need to be taken into consideration right away. Without stable economy, property prices tend to be stagnant. And with low demand the property is unlikely to increase in value fast. With high supply of rent properties or low occupation rates, monthly rent payments tend to be low, putting pressure on the owners to keep up with the market.

Generally, a property is deemed to be a long term investment. Whenever buying a residential property as an investment it is wise to be committed for a long term. An owner has to have confidence in themselves and their action plan. An individual has to be patient and learn how to deal with different tenants too. A suitable tenant with good credit history and stable employment is likely to pay rent on time making a tenant/owner relationship a smooth one.

As a general of thumb, property investment is very lucrative. Often times the rewards trump the risks. But its not all simple. One has to become an expert in the field before committing the larger portion of your financial portfolio into such an investment. Doing research, talking to experts and learning from others will make you more savvy which will ultimately decrease your exposure to potential losses.