In Search of the Right Income Property

July 5, 2013 by  
Filed under blog

Don’t let the title mislead you—there is no such thing as the perfect property, just as there no such thing as the perfect spouse, car, child or job.  But there are certainly “good” properties and even some “great” properties as well as “good” financing and “great” financing.  By the same token there are some real bad properties around, waiting to snare you. I want to steer you in the right direction towards the right property for what you are after and keep you from ever giving the bad ones a home in your portfolio.

First, decide exactly what it is you want out of your investment. Why are you buying a piece of income property?  Be specific.  Are you after a lucrative cash flow? Or do you want a profitable overall return? Is it for the cash flow in addition to the tax savings and what you might get after you do some “fix up” work?

In addition, a novice investor must understand the alternative types of real estate investments available to him or her.  Of course, there are the residential types of investments including houses, duplexes, apartment, rehabs and others but there is a myriad of other income-producing properties which fall in the category of “beyond residential”.  A few examples would include gas stations, small strip malls, mini storage, motels, and retail shops.

This second category is too often overlooked by beginning and even experienced investors.  If you’re looking only at the residential properties in your area, you’re missing the entire menu.  There are commercial properties that fall into the lower ranges but because commercial is often thought of as being for the big time investor, the smaller guys don’t look there. But think about it … why would there not be smaller commercial investments just as there are smaller residential investments? It doesn’t matter what kind of property is it, just that it’ll get you the best return for your investment dollar.

Also consider that property that might have been residential or commercial when you bought it can be converted to take advantage of better income producing options for the area. Vacant gas stations have been leased to counties as libraries; motels have been converted to office buildings or housing for the elderly; mini-warehouses have been built out of other commercial spaces behind sub divisions or trailer parks where storage space is scare and small warehouses have been converted into loft type apartments or duplexes.  There are many potential gold mines in commercial or “beyond residential” property.

I’m certainly not saying that commercial or “beyond residential” property makes a better investment than residential. I’m merely trying to point out that when you go looking for the perfect income producing real estate, don’t limit yourself to the residential category alone. Look at the full menu.

And lastly, don’t forget now is a particularly great time to be buying income real estate because prices are near historical lows relative to income and interest rates, even though they have moved up a bit in the last month, are still at very low! So doesn’t hesitate. Get out there, look at all the options and put your money to work!