Choosing the Right Investment Property

Choosing the right investment property:

The more I am involved in the management of investment real estate, the more I am convinced that making the right initial decision is critical to the success of the investment, on a number of levels. Here are 3 levels to consider when choosing the right investment property.

1) Financial

When choosing the right investment property I don’t think that considering the financial implications of an investment decision is a new concept to most investors – however, it is always useful to be reminded of some important factors. Return on Investment (ROI), Risk and Hidden Costs. Firstly, return on investment (we will be digging into this concept at a later date) is the return that you are going to get from the investment you have made. Secondly, the risk associated with that return – what are the chances of you actually seeing that return and how regular will it be and Thirdly, are there any hidden (or less obvious) financial considerations, for example the quality of the tenant that the property will attract, deferred maintenance etc.

After weighing these considerations against your personal risk profile, you will be able to make a confident decision, knowing what to expect from your investment property.

2) Personal

This is a slightly less obvious consideration, but one which will also have an impact on the outcome of your decision. If you are someone who loves to be involved in the detail of things, then you may end up managing your own property and, although it may save you some money, in the long run your investment properties can end up controlling your life. The more you are involved, the more you will be “needed” and the less freedom you will experience. In addition, there are the attempts by wily tenants to manipulate you so they can get what they want. Dealing with the inevitable confrontation is also something that a lot of investors underestimate. Bottom line, is that you need to decide whether you want to be a landlord or a real estate investor. Once you have made that decision and feel confident you understand the extent to which it will influence your life, it will become simple for you in choosing the right investment property

3) Emotional

Another less than obvious consideration – and yes, it may be very closely related to the personal effect, but I wanted to address this separately. Once you have decided that you want to be a landlord, then you need to be prepared for dealing with the type of people your investment property will attract – that will create some emotional challenges. For example, you are probably a good person and it may become a dilemma for you to hold someone accountable when they have a sad story or some convincing reason for doing what they have done. To maximize your return on investment, you will need to make the hard decision and even though it may be justified, a lot of owners end up feeling bad about making the right business decision – hence the emotional impact on you and your life. Too much of any of this, can lead to a negative impact on your returns and your life.

Watch this space for more value add articles from RESE Property Management LLC, if you have any questions or would like to have a chat about anything relating to real estate, please feel free to call the writer.

Call Tony du Preez @ 801-360-6424 or email tony@resepm.com

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