3 Real Estate Investment Strategies That aren’t as Good as They Sound

Real estate is considered one of the safest places to put your money in. And, why not, property prices have considerably boomed since some decades now. While real estate investment may be safe, it does require considerable thought. After all, a house is not like shares that can be instantly bought and sold. When you invest your money in a property, it can get tied up for a long time. Hence, when investing in a non-liquid asset like a property, you may take advice. When doing so, you may be bombed with various strategies that can earn you more profit. But, are these strategies as good as they claim to be?

There are several real estate investment strategies. Certain strategies may sound great but may not be as good as they seem to be. Today, we give you some such strategies that sound attractive but can fail to deliver reliable returns.

Strategy 1 – Market Timing

The strategy is simple – observe price patterns in the real estate market, buy when the prices are low, and sell when they boom to earn substantial profits. Keeping an eye on the market and predicting it to make a profitable deal is a common strategy that applies to all kinds of investment. But, what’s wrong with this real estate investment strategy?

When implementing this strategy, people overlook the volatile nature of the market. Real estate prices fluctuate depending on cyclical movements, population, size of the area, income level, etc. So, if you think that, at a point, the price has hit the lowest mark, you may be wrong as it may also sink further. This makes it difficult to time the market. Also, individual returns must be considered. If you buy a house for a price that is more than its value, then even a rising market may not cover up for the value loss. Plus, real estate market recovery takes time. Thus, a single mistake can block your money for a long period.

While timing the market may be profitable at times, it must be thought over before implementing.

Strategy 2 – Flip Properties for Quick Profit

When one says flipping properties, it means buying a house with a number of problems for a low price, revamping it, and then selling it for a good price to make profits. Sounds great, isn’t it? Maybe it is not as great as it sounds. The problem with this strategy is that you cannot accurately estimate the costs to fix the house. People think it is an inexpensive and quick way to make profits. But, they often underestimate the costs incurred in revamping the house. Labor, materials, tools, repairs, replacements, etc. will all cost you. Even if you eliminate contractors, labor and other costs remain. Plus, return on investment rarely exceeds such costs. Hence, the idea may not be as enticing as it seems.

Strategy 3 – Rent as a Passive Income

Renting out the home is a great way to earn a passive income while your property gains value. But, this strategy has its limitations too. Being a landlord is not everyone’s cup of tea. You need to invest a substantial amount of time in property maintenance, advertising, tenant interviews, screening, management, etc. Furthermore, you cannot predict vacancies. A vacant home means no income for those months. Also, the maintenance and repair costs can keep accumulating over time depending on the condition of your property. This can lower your profits. The entire property management business can get taxing as well as expensive, especially if you are a first-timer.

All these real investment strategies come with their own advantages and limitations. Next time, when you hear any, make sure to do some thought-work before jumping on to implementation. Hiring Edmonton rental companies could be beneficial if you seek returns on your investment but don’t want any hassles.