In a booming market, real estate investing and its potential for making profit becomes increasingly alluring. However, if you are new to real estate investing, you should be aware that it does come with risks, even during a strong market. Before making any real estate investments, home hunters should enlist the expertise of a seasoned South Florida real estate professional and understand the following basics.
Types of Real Estate Investments
Typically, real estate investments aim to profit from either real estate appreciation or cash flow income.
1. Real Estate Appreciation —
This is when investors make a profit by buying and then selling properties after they appreciate in value due to changes in the real estate market, home improvements, and/or positive neighborhood developments. South Florida real estate professionals are keenly aware of promising neighborhoods and home-buying trends, thus they can assist investors in buying a property at a low price that has potential for a higher resale value.
2. Cash Flow Income —
This is when investors make a profit by buying properties and then renting them. Experienced South Florida real estate professionals can help in a couple of ways. The first, is to help the investor find properties in desirable areas. The second, is connecting potential tenants to those investment properties quicker than if the investor is attempting to do it alone since real estate agents have more access to clients that are looking to rent a property.
To Rent or To Flip
Investors have a choice between renting out their investment property or selling it for a profit, commonly referred to as property “flipping.”
- Renting —Investors should first review the local zoning laws to know if tenants are allowed. Additionally, they must determine whether the real estate investments they are considering will be worth making by using the “1% Rule,” which calls for a rental property having the potential to generate at least 1 percent of the price it was bought for.
- Flipping — Investors must be able to accurately predict changes in the real estate market and/or neighborhoods that will increase an investment property’s value. Flippers need to buy substantially discounted properties, typically in need of repair, and must have the funds and expertise to renovate them. Generally, flipping homes is riskier than renting them.
Location is key in real estate investing, regardless of whether the investment property will be flipped or rented out. It is a fundamental truth that buyers and tenants want properties located in attractive neighborhoods. However, purchasing from established neighborhoods can be expensive and might yield a lower return, so investors should search for up-and-coming neighborhoods. A South Florida real estate professional can point you toward the right direction.
If you are venturing into real estate investing or are just looking for a new home, call Stein Posner today.