Real estate investing is one of the best ways to beat the stock market and create the retirement of your dreams, but most financial advisors don’t recommend alternative investments, including income-producing property like vacation home rentals. To help fill that void, here are five tried-and-true real estate investment tips to ensure success.
1. Buy Within Your Means
In other words, don’t be afraid to take risks, but also don’t risk losing or spending money that you really can’t afford to lose or spend. One way to think outside the box and still work within these parameters is by tapping into your IRA and diverting a portion to buying alternative investments like real estate. This is a perfectly legal way to avoid the highs and lows of the stock market and diversify your retirement portfolio to increase your return on investment while providing a strong hedge against inflation. In some cases, it may also be possible to roll assets from another retirement account, such as a Roth IRA or 401k, into a Self-Directed IRA account where real estate purchases are permitted.
2. Avoid Analysis Paralysis
Another way to say this is: Find a good deal and buy it – don’t always wait and keep looking for a better opportunity. Most great real estate investment opportunities aren’t available for long, so odds are good that if you hesitate someone else won’t and the property will be gone. This is especially true with income-producing property like vacation home rentals, which can provide excellent return on investment and – at the same time – offer a great place to escape from the hassles of everyday life with friends and family.
3. Don’t Pay Full Retail Price
Or more specifically, if you do pay full retail price, look for income-producing investments like vacation home rentals that will quickly make up for it through strong return on investment and excellent appreciation. Whenever possible, look for pre-construction deals on turnkey vacation rentals like luxury condos that offer a great rental income. Start by looking in the world’s most popular vacation destinations, where tourism numbers continue to rise and occupancy rates are between 80-90%.
4. Keep Emotions Out of the Equation
This one can be tough, especially if you are looking at luxury condos and vacation homes in popular vacation destinations that you love to visit, or if you find the “perfect deal” on a profitable investment property. But regardless of what you find or how ideal it might seem, remember that it’s always best to move deliberately and steadily from a place of determination and realistic expectations, instead of jumping on a seemingly great opportunity you haven’t adequately researched. Sometimes the best deals are right under your nose, but in order to figure out which income-producing investments outshine the others, it requires a bit of digging.
5. Consider the Cost of Your Time
Finally, it’s important to point out that savvy investors always place great value on their time and the same should hold true for real estate investing. For example, a 50-unit apartment building might be a great income-producing property, but when you factor in how much time and energy it will require to properly manage and maintain the units, it might not be the best investment option for someone who already has a busy life and successful career. On the other hand, you might find that income-producing investments like turnkey vacation rentals that are maintained and rented out by a professional property management company offer much more freedom, along with excellent appreciation, return on investment and the added benefit of owning a slice of paradise.
Have you ever thought about buying a real estate investment property? Let us know in the comments below!
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