INVESTMENT PROPERTIES:

So you're looking for investment property?  

Investing in real estate is probably your best hedge against inflation and has the greatest potential for appreciation of your investment over the long term. 

Real Estate has historically outperformed most other investments over the long term. 

So where and how do you start?  You can start by choosing a qualified real estate Broker who is also a realtor and has firsthand knowledge about investing in real estate. 

Investing in real estate is not as easy as other investments.  And although the potential for financial gain is great, there is always a risk of loss associated with real estate investing as with any other investment. 

Before you and your real estate Broker move forward, thought needs to be given to the type of property you are interested in; single family resident; multi-family; retail; commercial; or land. 

Remember, just like your primary home, you will need financing, a down payment and the income to qualify for the investment purchase.    Also remember that lenders are a little more stringent in their qualifying criteria for loans because any type of investment property is riskier than a primary residence purchase for the lender. 

Investing in single family homes is one option to consider.  Be sure you know what the market rents are in the area so you do not have a negative cash flow.  Also know the value of the property you are considering.  Your real estate Broker will help you with these items.  Sometimes negative incomes are alright if it does not put a financial strain on your wallet.  It definitely may help you at tax time. 

For me, I have invested in properties that have a negative cash flow and over a period of time both rents and values go up.  So you end up with a "positive cash flow" or you sell your investment for a profit.  Once you reach a positive cash flow you have the option to pull out some equity and buy an additional property.  Your cash flow will diminish but you will own another additional house. 

Be sure you are prepared to be a landlord.  It is important to have funds for repairs, maintenance, vacancies (this requires the payments of additional mortgages), utilities, taxes, insurance, etc.  Rentals are good when they are rented but are expensive when vacant.  I always look at the money I spend on a vacancy as putting money into the bank, my investment bank.  If done right, you will more than make up for any money you put into your property when you sell it.  Bu you must also maintain your property in tiptop shape.  In this manner you are always ready to sell and you can plan on top market price due to the condition of your property.

There are many investors whose only concern is their monthly income and they do the minimum to maintain their properties.  Remember that the big payoff is when you sell!  But to maximize your profit, maintenance is the key.  The ideal situation is to have a positive cash flow and to maximize your value by maintenance and upkeep. 

Another advantage of single family homes is that they rent faster than apartments and they sell faster.  So if you can handle the expenses when vacant, this is a good real estate investment.  Just be sure your purchase is in an area where rents and property values will increase.  In other words, do not purchase investment property in an area that is depressed.  It may not benefit you in the long term.  This type of purchase may only benefit you through a good monthly income.  Be wise when you purchase.  Use your realtor to help you evaluate the area before you purchase. 

Multi-family units, including duplexes, triplexes, 4plex's, and larger units are also investments to consider. 

What I like about multi unit properties is that when 1, 2, or more units are vacant, there is still a continuance of some income from the rented unit(s) to help your expenses. 

The turnover of tenants happens more often and vacancies are higher than single family units.  But the repairs and maintenance may be quicker and less costly due to the size differential between a single family dwelling versus an apartment. 

Multi-units can be labor intensive if you manage your own units due to the higher rate of turnover.  But just like your single family investment, if you always keep your property in tip top shape, the time and money you spend in repair and maintenance (barring tenant damage) will be minimized.  More importantly, when you are ready to sell, you should be able to maximize your sale price.  But keep in mind, multi-units take longer to sell than single family houses.  And besides maintaining your property in good shape to maximize your current income and future sale price, you must maximize your rents received because any unit larger than a duplex is generally viewed by other buyers/investors by their total income to determine value when purchased. 

My current preferences for investment real estate are 4plex's.  I still invest in single family homes but primarily for "flips". 

What about commercial and retail properties?  I feel these types of investments are better suited for the hands off investor.  Many commercial leases are totally all inclusive.  Buying this type of investment can offer a steady stream of income with minimal, if any, involvement.  Many of these leases can be written for the term of years.  All maintenance and expenses can be written into the lease for the tenant to pay (triple net lease).  Rent increases can also be written into the lease for the term of the lease.  All property improvements can be written into the lease to be the responsibility of the tenant.  

But just like your other investment type properties, when vacant, it may cost you money.  Also, these types of properties may take a lot longer to fill the vacancy.  But once leased, turnover may be low.  

Be sure to do a market analysis of your commercial or retail property before purchasing.  You should have your broker determine what your rate of return will be on your prospective purchase.  There are other factors that should be considered before moving forward on commercial or retail property purchases. 

What about vacant land?  I would be very careful about bare land.  Do your research (which you need to do on all your property purchases) as to the usability of the land.  Be sure to know what you need or want the land for and will it work for you.  

Remember bare land does not generate income unless it is leased such as agricultural or pasture land.  Also, bare land does not depreciate so you lose this benefit at tax time.  You also have to pay taxes and possibly other assessments, bonds, insurance, etc. 

Does this mean that land is a bad investment?  It may be or it may not be.  I am always looking for bare land at a good price.  I have certain needs and wants that a smaller parcel or two may fulfill.  I have not found what I want or need either due to the location or price.  So I keep looking. 

If you buy your land at a good price and in an area that may be in demand now or in the future, you may profit from it.  I would be extremely careful about this type of investment.  I personally would recommend avoiding buying bare land because the appreciation of value may not be what you are looking for in the long run.  Additionally, land, unless located in a highly desirable area, will generally take the longest time to sell compared to other type of real estate while not generating any income. 

Investing in real estate in Sacramento, Ca is a great thing as long as you are able to withstand the lows in the market so you can reap the rewards during the highs in the market.  As always, have a qualified broker realtor such as myself to assist you with all your real estate investments. 

Investing in real estate can be intimidating and scary.  So whether you are looking to invest on single family homes, multi units, commercial, retail or bare land, let Cal-North Realty or any other realtor of your choice, guide you through the process.  Our experience in buying, selling and leasing all type of real estate including single family, multi units, commercial and bare land will give you the advantage when it comes to your real estate investments, purchases, sales and leasing. 

Even if you are not ready yet, you can call or email me, without obligation, anytime with any real estate question you may have.  The more research you do and the more tools you have (Cal-North Realty) at your disposal, will give you the advantage to succeed in the wonderful world of real estate investing.