Many people are aware of the financial benefits of adding rental property to their investment portfolio. The addition of real property provides a means of diversification you can't achieve by simply owning stocks and bonds. How do you know which property will make sense financially and which will lead to buyer's remorse?
Over the next several months, I'll be writing short blogs to address components of rental property selection. One of the first decisions to make is to define your target property. What type of property and in what location? Perhaps you want to only buy brick exterior, 3 bedroom/2 bath properties in good school districts within a 45 drive of your current residence? Maybe you would prefer to purchase a duplex or triplex near a college and focus on the student housing niche.
"Investing in real estate" is a very non specific statement. Real estate can mean anything from a shopping center to 500 acres in W. Texas. Each property type has it's own set of pro's and con's. Single family homes offer the advantage of multiple exit strategies when you get ready to sell, but at a cost of less monthly cashflow than a duplex or apartment complex. By focusing in on one area of investment real estate, you are able to develop a level of expertise in your "niche" area quickly. During our next installment, we'll discuss tools and tips to quickly screen properties.