When considering making an investment in real estate, many new investors struggle with what to offer. Part of the challenge for them is deciding what their exit strategy will be. In other words, will they be purchasing the property and then immediately reselling it? Will they sell the contract before they even close? Will they be buying it to rent and hold long term?

Not knowing what you ultimately want to do with the property makes it extremely difficult to structure an offer to purchase.

This is actually a challenge we had when modeling the how to make purchases of real estate in our Learn To Be Rich investment game. Here’s how I handled it.

To simplify the process, we divided purchasing real estate into two major categories: buying for equity or buying for income.

Buying for equity is purchasing the property at a discount from the current fair market value. This is usually when you are buying a house to fix up and resell.

Buying for income is purchasing the property based on the payments and expenses you will incur when you hold the property as a rental. It also includes assessing the income that the property will produce. This analysis is typically used when you will be holding the property as a long-term investment.

By simplifying the process, investors can now decide whether they are buying for income or equity. It makes it much easier to recognize a good deal with this clear-cut criteria.

For example, if an investor is buying based on equity and he wants to make $10,000 on the deal, he can easily calculate what he can afford to pay for the house in order to net that amount in profit.

On the other hand, if an investor is buying based on income and he wants to make $100 per month, it is just as easy to calculate what his payments and expenses will be. By getting an accurate estimate of what the rental income will be, you can then reverse calculate the price you can afford to pay by using current interest rates in order to have the desired monthly payment amount that makes the property cash flow.

Investing in real estate scares some people. Understanding just what will happen when you invest, and even how to do it, can leave most people bewildered. This article’s been assembled to supply you with the some easy, but effective tips on entering the exciting field of real estate investing.

Remember that real estate investing is all about the numbers. When you’re buying a home to live in, you may get emotional about the place, but there’s no room for that in investing. You need to keep your eye on the data and make your decisions with your head, not your heart.

Do not be afraid to spend money on marketing. It is easy to just focus on the numbers and get fixated on how much marketing is costing you. However, it is important to think of the marketing as an investment in and of itself. If done the right way, it will only benefit you in the end.

Keep an accountant on speed dial. You can be aware of tax laws and current taxation; however, there are many variables to keep in mind. A good accountant, that understands and keeps abreast of tax laws, can be an invaluable asset. Your success with investing can be made or broken by your approach to taxes.

When negotiating, you should limit the amount of talking you do. You will be surprised at how often someone will do all the work for you just by letting them speak. Also, because you are listening, you will catch the right moment to strike for the price you seek.

As you look for investment properties, seek those that are likely to grow in value. Purchasing anything near water or close to other businesses will be beneficial to you later on. Think about the big picture and the chances its value will increase.

Don’t let your emotions cloud your judgement. Choosing a property to invest in should be a business decision, not an emotional one. It can be easy to get attached to a house or really fall in love with a location. Try to always look at things objectively. Shop around for the best deal without getting attached to one of the first few places you look at.

Find a contractor to work with that you can get along with. There’s no reason to get someone to help you with fixing up the real estate you invest in if you don’t like how they operate. You can save yourself a lot of frustration if you just find someone that you know will work well with you.

Stay away from deals that are too good to be true, especially with investors that you cannot trust or do not have a good reputation. It is important to stick with those who have a good reputation because getting ripped off in this business can cost you a lot of money.

Build your real estate investment buyers list with online ads. For example, you could use social media, online ad sites such as CraigsList and/or the local newspaper to draw attention to the properties you have on offer. Be sure to retain contact information for every person who shows and interest so you will have a well-rounded contact list as you accrue new properties.

Know the value of your time. You may enjoy renovating properties, but is the time you’re spending on it time well spent? Consider if you could better spend your time by searching for the next opportunity. If you are able to outsource certain jobs, then you should do so. It’s worth freeing up your time for the more important aspects of your business.

Don’t buy property in a bad neighbourhood. Pay close attention to where a property you are interested in is located. Make sure you are very thorough when looking at the area. Homes in bad neighbourhoods are often low-priced. The property could be at risk for being vandalized and may be hard to sell.

If you are thinking about purchasing rental properties, consider hiring a property manager who can help you screen qualified tenants. Because rental payments are likely to be the source of your mortgage payment, your tenants need to be reliable. Otherwise, you may end up losing money.

Before you buy investment property in a neighbourhood, find out if the city has anything planned for the areas surrounding this neighbourhood. For example, you would not want to buy in an area if the city proposed to turn an area into a landfill. If there are positive improvements on the horizon, this may be a good investment.

Don’t let a real estate investment deplete your emergency reserve or cash fund. When you invest in real estate, you’ll often not be able to access the money for a while. Don’t let this situation destroy your ability to live from one day to the next.

Know what you should be looking for in a property based on current trends in the market. For example, if you’re going to rent out the properties you buy, then it’s best to have units that are for single people, which is a current trend. Another example is to ensure any home you buy has three or more bedrooms because it will be easier for you to sell or rent to families.

As you see, there is a lot of information to learn regarding real estate investments. This article has provided you with the proper foundation concerning real estate investing. So, remember what you have learned, keep learning and get into real estate investing today.

Most real estate investments will fall into five categories – single-family residential investment properties, multi-family residential investments, commercial properties, undeveloped land or lots, and real estate investment trusts. To learn about each type of investment property, keep reading.

Single Family Residential Investment Properties

Whether you’re purchasing a traditional single-family home, condo, town house or cooperative, these all fall under the header of single-family residential properties.

Typically, the traditional single-family home offers the easiest purchasing and selling process along with a fairly reliable market and rate of return. Buying a condo means you not only get the unit, but also a share of the common areas. However, you’ll also be paying for condo association fees each month to cover the maintenance costs associated with the building.

Town homes are simply attached homes – that is, more than one attached to others. Their only stipulation is that they may have to meet requirements about exterior paint colors, gardens and possibly parking. Finally, co-operatives offer a share in the entire building, which includes the space in which you live. Generally, you need to obtain permission from the co-op association if you want to rent or renovate your unit.

Multi-Family Residential Investments

From a simple duplex to a four-unit apartment building, these are all multi-family residential investments typically purchased to provide the investor with ongoing rental income while the property appreciates in value.

The advantage is that these properties provide cash flow which improves with time since the mortgage payments will remain fixed while rents eventually increase. In addition, buyers of multi-family properties with existing tenants can use a percentage of the rental income toward their monthly income statement on their mortgage application.

Commercial Properties

Commercial property includes large apartment buildings (more than five units), industrial space, retail space and office space. Typically, investment in these properties can be complicated and dragged down with bureaucracy and taxes.

If you’re considering jumping into commercial properties, hire a good accountant and a very experienced commercial real estate lawyer.

Undeveloped Land

This involves simply buying a plot of land that doesn’t have a building on it. The advantage is it often costs less and you don’t have to deal with tenants or property maintenance. The trick is finding land in an area where property value is steadily appreciating. So, look for an area where a community is expanding, and then purchase land there.

Real Estate Investment Trusts

Real Estate Investment Trusts (REIT) are private, for-profit companies that let small investors invest in large, commercial, income-producing properties.