To acquire a massive personal fortune by means of real estate may seem beyond the scope of reality, but it is possible. If you have built up a decent nest egg and are wondering what to do next, when the crash comes when preparing for the worst, trying to position yourself for the next boom when preparing for the best, or where to seek to find an investment deal in real estate that is solid, remember that you need to keep it simple and give close attention to the following three basic concepts.
You Need to Maintain Conservative Ratios
If you are buying or building real estate in order to hold it long-term, you need to ensure that property is going to have a good cash flow, even if the result is utilizing more equity for a slightly lower return. It is important to maintain a conservative debt service ratio because over-leveraging runs a greater risk of total loss of investment. Avoiding loss is often a preferable route to wealth accumulation in real estate than seeking high yields with every investment.
You Cannot Underestimate the Importance of Location
Traditionally, location is said in itself to be the trio of most important things. You need to remain close to town, remain close to services, and remain close to the correct level of money or wealth. For example, do not try to place a low-income housing project within the posh Beverly Hills, and do not build multi-million dollar condominiums in rural Alaska. The point here is that your properties should blend in with the territory that surrounds them. When it comes to location, do not try to be someone who bucks the trend.
Consider Supply and Demand
Many investors can easily make the mistake of ignoring the concept of supply and demand; they can see it as easy to avoid and easy to quantify. But there is a basis upon which to act in order to not make this type of mistake. Find the information, then pay attention to it. If there are more projects entering an area than their demand exists for it, then move on. Many people find themselves trying to compete in places where development is running rampant, with people justifying their deals or working to do so because they believe their projects are superior to the several other similar ones under construction.