A real estate investment can simply be described as putting down something today and expecting to make some return tomorrow. As an investor, you’ll have to identify an investment vehicle where you can invest your resources and make more money in the future and you’ll have to determine the pros and cons of each investment opportunity.
There are some key factors that you must take into consideration when looking at a real estate investment.
The Risk Factor
Risk or the uncertainly of making the expected return on that investment is a key factor. The best description of risk is simply not understanding what the investment is all about. It goes beyond the common belief that the higher the risk the higher the returns. If you do not understand the real estate investment you are looking at then you are taking on a big risk.
The Liquidity Factor
You must consider how liquid the investment is. This refers the ease of converting the investment into cash. Some investments like stock are very easy to dispose of while others take a while to sell off like real estate. You must find a suitable buyer and then sell it off. The selling process can take awhile. The buyer must complete the process of financing, the house must be appraised before the sale is complete, and then there is the process of changing documents.
While a real estate investment is not as liquid as other investment opportunities, the potential is there for much higher returns. This must be factored into your decision.
The Management Factor
Some investments need to have hands-on management while others do not really require a lot. Real estate is one of those investments that require proper management. This includes collecting rent, carrying out repairs, paying taxes and insurance, etc. A good property manager is essential if you are planning on playing a real estate investment game.
Leverage refers to the use of finances from a financing body for investment. Leverage does not work for all types of investments. A real estate investment is one of the few investments that allow for leverage in order to increase investment returns.
This is a measure of the rate at which an investment grows in value. Some investments grow slowly but steadily, others keep fluctuating while others do not change much. Real estate is an investment that generally grows steadily in value, and if it does dip, it will rise again stronger than ever.
The tax implications of any investment are important. Real estate is an investment that has a relatively light tax burden, if done correctly.
Make sure that you examine all these factors when choosing to make a Vancuver real estate investment. Select an investment that best suits your goals and budget by taking all of these factors into account.