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If you’re thinking of investing in property, your goal may seem simple: to make money, of course. But there are various kinds of investment properties, lengths of timelines on returns, and degrees of investor resources. Each of these will determine the type of property investment you should make. Read on for some tips on what to consider when choosing the type of property investment that’s right for you, and stay tuned for a follow-up post about crunching the numbers on your chosen investment property type.
Understanding your specific investment goals is an important starting point.
Maybe you’re investing to pay for your kids’ education or to boost your retirement savings (these are common uses of long-term real estate investment income). Or perhaps it’s a short-term investment you’re after, a quick turnaround to cover renovation costs on your existing property or to pay for a family vacation (these are less common, as property is not an easily liquefied asset, but they could be the right choice if you have the risk tolerance to enter into a rapidly booming market). Or maybe you’re a seasoned investor with multiple properties and transactions under your belt, and your goal is to grow your already-thriving portfolio.
Be as specific as possible when outlining your goals; for example, don’t simply say “I want to sell this property for more than I paid for it.” Outline a goal using something like the following parameters:
When you have a specific investment goal, it’s much easier to track your progress, measure your success, and take pride in your achievements.
It may seem prudent to invest in locations and property types that are familiar to you, but keep in mind that there could be undiscovered (and profitable!) opportunities elsewhere, not only in the city where you live, but in your larger geographic region. Is there hidden value in a regional growth corridor? Should you be considering investments outside of the residential property market, in commercial or industrial spaces?
Consider the following types of investment properties, and their pros and cons:
Now that you’re aware of all the options open to you, it’s time to crunch the numbers. In our next post on understanding your investment goals, we’ll look at how to predict your regular income (cash flow), the overall profits you can expect (return on investment), and the importance of understanding and securing financing, interest rates, and down payments.