2. October 2009 07:53
How do you determine what strategy to use when looking to buy investment properties and what sort of investment property should you be looking for? The first step is to assess your financial picture and determine your level of risk. Can you stomach risk for a bigger reward or are you looking to play it safe and find a blue chip investment? Do you own your own home, and if so, how much equity do you have in your home? Do you have an available line of credit, or money socked away in a savings account for the purpose of investing in real estate? Having a clear picture of how much money you have at your disposal will go a long way in determining which strategy to use.
When we delve into more advanced investing I will show you ways to invest in properties without taking a dime out of your pocket by investing in homes based on the equity in your home. For the new or intermediate investor, the pros and cons of either method will always be debated. As a buy and flip - it is a riskier investment, requires more capital and puts you at the mercy of contractors and trades people. On the flip side, there is a bigger reward for the risk, doesn’t tie your capital up for a long period of time and gives you the satisfaction of a large return in a short period of time. If buy and hold is your strength, the pros and cons are as such; you don’t require a lot of capital up front, you own an appreciating asset which is paid off by a tenant, and you will create cash flow from the investment. The cons of this method are you need to be comfortable as a landlord, your capital is tied up for a long period of time and it is tough to see the benefits right away.
The only way to diversify your portfolio is to own a piece of both and minimize your risk. If you are looking to invest in real estate, have a plan, know your budget and know the type of risk you are willing to take. In the end the only risky thing about investing in real estate is not investing at all.
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