This is the classic landlord-tenant model of real estate investment: the landlord buys a property, rents it out to a single household, then pays the costs of mortgage, maintenance and so on while receiving the rent as monthly income – which goes up enormously once the mortgage is paid off.
Read MoreThe first thing we need to know to start to analyze any real estate opportunity is to understand where we are on the real estate cycle. And this is extremely local. What happens in a specific neighborhood might be completely different from 5 miles away. Are we on an uptrend or downturn? How long has the market been on that stage? What are price trends signaling? Is the market changing or close to a change?Although there are good real estate investments in every cycle, different markets require different approach and investment strategies.
Nothing is more powerful then demographic trends. They can override economic cycles creating a different reality in a specific city or state. Fundamentally, we need to be aware of the social-economic changes. Watch out for migration and age shift trends as they require specific products and services.
It is very difficult to make returns out of an overvalued property. Do a thorough real estate comparables analysis before any purchase.