How Much Will I Make on My Real Estate Investment?

Whether you’re new to the world of real estate investing, or you have some experience investing in real estate, you rightfully want to know “how much will I make on my real estate investment?”

Of course, there is no “one size fits all” approach to real estate investing, just as there is no one single answer or guide that you can follow that will tell you exactly how much you’re going to make. It depends on two things:

  1. The state of the real estate market 
  2. The right investment decisions 

The market will rise and fall with economic, financial and other details, and the market can be experiencing very different effects in different locations, but when it comes to real estate investment advice, at LBC Capital, we can absolutely offer you some tips to help you make better real estate investment purchases.

How to Choose a Great Location 

Investing in real estate first and foremost involves choosing a great location. Initially, some areas may be priced higher than others, but that is because their rental yield (their potential) is higher. The good news is that this lets you find tenants quicker and rent the property at a reasonable price.

With this in mind, look for a friendly neighborhood that is well-equipped and has well-maintained roads and other modern conveniences. Of course, you’ll want to keep a finger on the pulse of the real estate market. Depending on where you want to invest, the image of some neighborhoods may not be as enticing. The bottom line with real estate investing is that you find a location that meets your tenants’ needs.

But location isn’t the only factor to keep in mind.

The Debt Ratio Calculation

It’s important to remember the depreciation happens to all rentals, and you’ll want to account for the taxation on commercial and industrial profits. Looking at an example of a debt ratio calculation leveraging a conventional method, your debt to income ratio should not exceed 33% of your income. But not all lenders use this calculation method. If the calculation takes you into negative number territory, simply change lenders! You can override intermediaries in order to buy property right away and avoid agency fees. You can also do much of the legwork yourself or look at low rate loans.

The Power of Partnerships 

Investing with a partner in real estate can be a very lucrative enterprise, particularly if you both complement each other’s abilities and are willing to put in the work and leverage the ideas to fruition.
If your partner is unafraid of real estate investing and has a more aggressive approach, it may not be a good fit. There are limitations to the amount of debt you can carry, so it’s likely that you won’t be able to both buy a house and invest in a rental property simultaneously. But you’ll also have an additional return because your own property will grow in value over time.

You’ll also be getting a second return when your tenants repay the mortgage loan tied to your building. While you’re you’re deciding on the investment, this will give you a good indication of the neighborhood.

Betting on buildings to help provide a stable income for your future can be a smart idea, especially if you’re renting smaller or medium sized properties. Many people do this, especially first time investors, so you wouldn’t be alone nor the first to take advantage of smaller properties in bigger real estate markets.

Myths and Misconceptions about Real Estate Investing 

First-time investors may be a bit hesitant to jump into real estate investing, simply because they think they have to be rich in order to invest in real estate. But there is a way to buy real estate without needing to take money out of your own pocket. When excellent property prospects become available, there’s a lot more competition for it.

What’s more, investing in real estate, rather than having to rely on your employer to take care of you, is an investment in capital, and having easy access to capital can completely change the way you invest in real estate, for the better.

To learn more about investing in real estate and getting access to the funding you need to make swift, confident investments, contact LBC Capital today.

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