When buying an investment property it is advised that you start small. Just like most aspects of life, it is good to get your feet wet before your dive right in. Before you buy a large apartment complex it is best to try an investment property that will be easier to manage, such as a single family rental home.
The advantages of learning the tricks of the trade with a relatively inexpensive investment property are not always so obvious. To begin with, an investment property such as a small rental home offers a small financial footprint. The price of learning the business and potentially failing is therefore much smaller than it would be if you started out with a million dollar apartment complex. Even if the venture to manage a rental home doesn’t work out for you and you decide to exit your real estate investment strategy, more than likely you will recoup most of your money on the sale of the property. You stand to lose some money make no mistake, but it won’t be enough to break the bank.
On the other hand, if you decided to dive right into the investment property business then you may have dug yourself a hole you will never be able to get out of. Should things go awry and you are forced to sell the million dollar property, even a small 5-10% loss on the investment could result in long- term financial damages.
Starting off with a small investment property can also help you become a better property manager. It is easier to adequately address the needs of just one tenant than it is trying to solve the problems of several tenants at once. Part of making an investment property successful is adding value to the rental. If you can learn how to please one tenant, then you will be in a better position to extend what you have learned and please all the tenants in a larger complex. Indeed, experience is priceless.
When you invest in a single family dwelling your financial investment is relatively low. This financial investment directly relates to your commitment level to the venture. Somebody who has invested a large amount of money in an apartment complex will be all the more committed to seeing that the investment property turns a profit. There is no shame in working hard and seeing to it that things work out for the best, but if you are unable to walk away from the investment then you may stand to lose a whole lot more money than you should. Thus, a lower commitment level allows you to more accurately reassess whether investing in real estate is right for you. If you decide it isn’t right it will be easier to walk away from a rental home investment property than a more expensive apartment complex.
Purchasing and turning a profit on an investment property is just like any game one might play in life. To be successful you must learn and completely understand the rules. Once you have the rules mastered then you may go ahead and play your hand aggressively, but until then it is in your best interest to take it slow and learn the ins and outs of the game. Starting out slow with a singleFree Articles, lower value investment property will help you stay alive in the real estate game longer and hopefully become a powerhouse down the line.
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ABOUT THE AUTHOR
Adam Smith is an internet marketer specializing in affiliate program management for 10Xmarketing.com. More information on earning a positive cash flow on an investment property can be found at One Minute Millionare .