Investment Property
Is That Investment Property Really the Deal For You?
By Buyincomeproperty.com
Nov 21, 2005, 09:57

There are many factors to be considered before you commit to investment property. Among the most important facts to consider are amount of capital required, expected returns and amount of time the investment property will take.

It’s been said that time is one of the most important things we have. Most people will admit that there never seem to be enough hours in the day, and that finding time to simply enjoy life is at the top of their priority list but the bottom of their accomplishments. The right investment property may help you accomplish that goal, but some investment property opportunities will take more time than you are ready to invest.

When most people think about the cost of investment property, money is the first thing that comes to mind. But money may not be the only thing required in an investment property deal, and it may not even be the most important. By the same token, it may be tempting to look at a particular investment property opportunity and decide that it’s a good deal because it will require a lot of time but less capital investment. Evaluating that “good deal” becomes vital to the success of the investment property venture.

Take a moment to realistically decide what you expect from an investment property deal. More than likely, it will depend largely on the amount of return you’re expecting from the investment property. Consider this scenario. You find a small business that needs an investor in the form of purchasing the property for the business. You hand over the capital to buy the land and building and the business is off and running. If that’s all that was required of you, you may expect less in the form of capital return than if you were also spending several hours a day in hands-on activities for the business. If you also become a manager for this endeavor, you’re more than likely going to require a larger return on your investment.

Before you lay down the cash for the investment property, have an accurate picture of what will be expected of you. Then carefully consider if you’re willing to meet those requirements. It may not sound like too much to ask that you give up a few hours a week to help with the business as part of your investment, but take a look at the expected return. Is it enough to support you? If that’s the case, a few hours a week probably isn’t too much to ask. But if you’re also going to be holding a fulltime job or to continue with other investment property deals, those few hours may become a real chore.

Before you start making plans about the returns on your investment property, take a minute to evaluate those figures. Are they realistic or overly optimistic? Does it sound too good to be true (because it very well may be)?

The length of your commitment to the investment property should also be considered. If you’re tying up money for a long period of time, you have to decide whether it’s likely that a better deal will come along. Ideally, you’d have the opportunity for a short-term investment with an opportunity to renew – but it’s not likely that will happen. But you should always look at your options for getting out of the investment property deal if it should turn out that there’s too much time or too little return on your investment.