Investing in real estate can be daunting, and some people find it difficult to choose the right property to invest in. There are many factors to consider when investing in real estate and below are three sure-fire ways to recognize a good real estate deal:
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It has a positive cash-on-cash return
Cash-on-cash return is the percentage of the before-tax income to the total cash investment (usually the down payment). When purchasing real estate, one should consider the cash-on-cash return of the investment. Using a simple formula (before-tax income divided by the total cash investment), the investor can determine if the cash-on-cash return for the property is positive or negative. Experts suggest that investors should avoid high-value properties (such as flashy condo units or expensive beach houses) because they tend to yield negative cash-on-cash returns.
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It has to be a low-risk investment
Real estate is a risky business but with the right papers and due diligence, it’s possible to lower the danger of losing money on real estate. It’s important to be smart about where and what investment to make to avoid scams or bust properties.
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It doesn’t take too much time or management
When buying real estate, investors should consider how much time and money they would invest in the long term. Expensive properties sometimes take too much effort to maintain compared to moderately priced residence or commercial properties.