How to Make Sound Real Estate Investments with Peter Lowes
Some Advice to Keep in Mind When Considering the Purchase of Property
As far as investments are concerned, real estate has always been the single most dependable to net a gain in the long-term. So long as the properties in question are properly maintained, it is as close to a guarantee as is possible, financially speaking. Although generally thought of as an alternative asset as opposed to a more conventional asset such as stocks or bonds, real estate has only become a viable investment option for the general public relatively recently. Until the last sixty years or so, owning lands and properties outside of a person’s dwelling was the near-exclusive domain of the very wealthy. That is, of course, no longer the case, and ordinary people are now rushing in droves to put their money into real estate. The tax breaks and incentives associated with owning property alone make it an enticing proposition, but there are other factors at play, as well. For one, as an investment strategy, it looks good by comparison. Stocks are volatile. Bonds mature and stop paying out after a certain point. Complex modern financial instruments are unproven and have a spotty track record, at best. In contrast, owning real estate seems like a proven, relatively stable source of income with a steady potential for growth. All that being said, buying real estate is not a fool-proof method of accumulating wealth. Each situation — each building and each plot of land — is unique, imbued with its own advantages and fraught with its own problems.
So, what is the best strategy? What are the best ways to make sound investments in real estate? The truth is there are a number of smart ways to acquire property. The following is a short synopsis of three of the most popular approaches according to real estate professional Peter Lowes.
Buying Property to Rent Out on a Long-Term Basis
When the average person thinks about real estate investment, renting out property on a long-term basis is probably the first thing that leaps to mind — that is, buying a house or condominium with the intention of renting it to an individual or family. According to Peter Lowes, if this is the goal of the investor, a few key factors ought to be kept in mind, the first of which is location. Investors tend to find the most success with long-term rentals in an urban areas, usually where property values are in the mid-to-high range. A comprehensive lease ought to be drawn up addressing every conceivable situation that might arise, from rental deposits to issues regarding pets. Then there is the matter of the monthly charge. The unit rental price should be high enough to cover maintenance costs while still leaving room for a tidy profit, but low enough to not scare away any prospective tenants.
Finally, when a person embarks upon renting out property on a long-term basis, make no mistake: they are signing up to become a landlord. The degree to which this will impact their life is variable, however, depending on how much upkeep the property requires and whether or not they employ a superintendent to take care of day-to-day duties.
Buying Property to Rent Out on a Short-Term Basis
Purchasing property with the intent to rent it out on a short-term basis as a way to generate income is currently all the rage. It usually takes the form of time-share vacation rentals, or, as is much more popular nowadays, listings featured on home sharing websites such as Airbnb or VRBO. Short-term rentals can present the property owner with a mixed bag. They can potentially generate far more income than long-term rentals, but there is generally more work attached in terms of schedule juggling and upkeep.
Another challenge can be the transient nature of the renters themselves. Whereas long-term tenants tend to view rental space as their home, short-term renters tend to view rental space as something more akin to a hotel room, which can create problems like noise complaints from neighbors or abuse of the space. Once again, location comes into play in a large way. It stands to reason that a property whose primary function is to attract vacationers ought to be near a place people traditionally take vacations. So, renting out a property on a short-term basis makes a lot of sense upon purchasing a beachside house, for instance, or a place located close to a tourist attraction. It does not make so much sense when buying a property in an isolated village or a town that doesn’t see very many tourists.
Made popular by television shows such as Trading Spaces and This Old House, the trend of buying an old fixer-upper and then cleaning, repairing, and improving it in order to sell it at a much higher price — a practice known as ‘flipping’ — has been gaining momentum for the past two decades. There is a good reason for this. If done correctly, a lot of money can be made.
Flipping a house is a great way to make a large sum of money off a single deal — but only if it is worth the time and effort of those doing the flipping. It’s an ideal investment for, say, a couple where one party is a carpenter and the other is an interior decorator. It’s not such a great investment for someone without a relevant skill-set looking to simply try their hand at something new. The learning curve is steep and missteps are expensive. If, in the process of the flip, enough mistakes are made, things can get costly to the point of rendering the whole project moot. Yet again, location is an important factor. The ideal house to flip is one in need of some heavy work but located in a desirable area. When conducting a search for candidates, it pays to research up-and-coming cities with older neighborhoods and starting there.
According to Peter Lowes, by taking the above advice to heart, any novice or would-be investor will be able to successfully navigate the housing markets and make sound financial choices.