What To Look For

What To Look For
By: Nicholas A. Dunlap, CPM

One of the questions I get asked the most with regard to investing in real estate is: what rate of return do you look for in order to proceed with an acquisition? The answer, though complex in nature, is quite simple. You see, Real Estate requires more physical work than other assets such as stocks or bonds. With that, it is only right that you earn more than you would by either keeping your money in the bank, purchasing stock in a company or investing in bonds. But just how much and what to look for? Although those questions will be answered differently by individual investors, consider the following.

A high interest earning savings account will bring you about a 1% annual return on the amount you keep in the account. Stocks will carve out a sawtooth pattern that you hope will end up higher than you purchased your shares for so that you can sell for a gain. Bonds will remain somewhat less rousing but should stay steady nonetheless. Now, time for real estate. Aside from the four benefits, you will want to identify investment opportunities in markets with strong fundamentals and growth potential. While primary So. Cal markets such as Los Angeles and Orange Counties present better opportunities in the SFR, 2 to 4 unit market, it is important to evaluate the real estate market as a whole and answer this question for yourself: what returns are you looking for? No expert can answer this question for you.

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