Real Estate Investment Principles

  Before actually setting out to find your first investment property it would be a good idea to set a target profit margin. In other words, decide how much money you would like to make on the project. By doing this you narrow down your property searches to those that are likely to result in an acceptable profit margin to you. Your acceptable profit margin will depend on your location, cost of rehabilitation, your own personal needs and expectations, and the market for your rehabilitated property. Never buy a property that won't result in a profit that equals your target amount.

Set Cost Limits

Set a maximum amount of money that you will spend to purchase and fix up a property. Never buy a property with fix up costs that will exceed your rehab cost limits. This also allows you to narrow your choices of property to buy and to avoid buying undesirable properties.

Establish a Market Area

You must now familiarize yourself with an area in which to buy property. Your target area should be within a five-mile radius of your home. Eighty percent of all properties you purchase should be within a five miles of your home. You can expand this radius if you live in rural areas.

There are a number of good reasons to buy in your area:

You are familiar and comfortable when close to home
Your network of construction crews and handymen are usually within that radius
You can manage your properties better if they are in your neighborhood. A weekly drive-by can save you thousands of dollars and years of headaches.
Buy Real Estate Right So It Will Cash Flow

Many people believe if they can buy a property for $15,000 to $20,000 below market value they will automatically have a good deal, but they are missing one key elements of investing. What they don't understand is that if they have to foot the bill for a $200 to $300 negative cash flow each month, their profit will be whittled away in a short period of time. This is especially true in times of slow real estate markets when properties do not sell quickly. The potential profit is worthless until the property is sold. Meanwhile, the owner is stuck with a negative cash flow each month.

So what do you look for in a good rental property? Two things: First, it must be able to attract good tenants, and second, it must be able to produce a positive cash flow within three months of purchase. To get good tenants, you must buy property in areas where there are schools, transportation, jobs, shopping, and churches. Tenants rent neighborhoods, not houses. The only way to be assured that your property will remain rented is to buy in the right areas of town.

Look at properties that you are considering buying through the eyes of a renter. If it appears that the property will not be attractive to tenants, don't buy it unless you can resell it for a very quick profit. This way you avoid buying properties that will be burdensome.

Your goal is to learn everything you can about your market area. Whenever you have the chance, take a drive and explore new neighborhoods. While doing so you may also come across some good bargains

Denver rental properties provides a tremendous opportunity for the savvy investor. Obtain the much needed knowledge required to be successful. Better information means bigger profits.