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6 Things You Should Know About Property Investment


Many people may want to become real estate investors, but few ever get the chance to achieve their goals. For most people, this is due to a lack of knowledge about what it takes to buy and sell a property for profit. In order to become a successful investor in commercial or residential properties, you need an understanding of how these transactions work from start to finish. In this article, we will explore six things that every prospective investor should know before taking the plunge into real estate investing!

1. Understand the Difference Between Commercial and Residential Properties

When you go out and purchase a property, you need to understand what type of property it is before you even consider the price tag. There are both differences and similarities between commercial and residential properties that will impact how much money you can expect to invest in each one.

One difference is that residential properties are typically purchased by an individual and used as a place to live, whereas commercial properties are used in order to generate income. As industry professionals at explain, this is due to the fact that residential properties, such as an apartment complex or home, usually require more maintenance and spend less time on the market compared to commercial properties like a convenience store or fast-food restaurant.

Another difference is that residential properties are generally less expensive than commercial properties. This makes sense since an individual probably doesn’t have as much money to invest as a business does. Commercial properties can cost anywhere from $1 million to $10 million, while it’s rare for a residential property to sell for more than $400,000.

2. Understand the Legal Considerations

To begin with, you must be aware of the tax implications that come with real estate investors. If you purchase a property for commercial use, then taxes will directly affect your business’s income and reduce the amount of profit you can make from this type of investment. For example, if you buy an office building in a place with high taxes, then you may end up making less money than if you purchased it in a more tax-friendly area.


Residential properties do not have this issue. This is due to the fact that most residential properties are considered owner-occupied and do not apply for commercial tax rates. You can avoid this issue altogether by purchasing a property that you plan to live in.

Tax rates are not the only consideration when it comes to taxes, however. Before purchasing a property, you should also be aware of how any tax liens will affect your debt-to-income ratio. This is because many mortgages require borrowers to keep their debt-to-income levels below a certain percentage. If a property has a tax lien on it, then this will count as debt and increase your ratio, which could make it more difficult to qualify for a mortgage.

3. Understand the Investment Opportunities in Your Area

A final thing that you need to understand before investing in real estate is where the best investment opportunities are located. It’s important to know this information since it will affect how much money you can expect to make. Some of the most profitable areas include New York, San Francisco, Miami, and Chicago. On average, many investors can expect to make anywhere from 6 to 8 percent in the first year alone, while some cities offer opportunities for investors to make up to 15 percent per year.

4. Determine How Much Money You Will Need

This is possibly one of the most important things you need to know about investing in real estate: how much money you will need to invest! While some properties are very affordable, others may require you to make a significant investment. For instance, an average one-bedroom apartment can cost anywhere from $30,000 to $80,000 depending on the neighborhood. On the other hand, buying a commercial property could easily cost millions of dollars if it’s in an expensive city like New York or San Francisco.


Additionally, you need to understand the home inspection process before purchasing a residential property. Home inspections are meant to protect the interests of both the buyer and seller by ensuring that the property is worth the price being asked and that any repairs will not cost a significant amount of money. Any issues found by the inspector must be addressed and usually paid for by the seller before closing occurs, even if they have nothing to do with you or your desire to purchase the property.

5. Be Aware of How Much You Can Make

Now that you know how much you can invest, it’s important to know how much money this type of investment could make you! While residential properties are known for offering steady returns, commercial real estate tends to be more volatile in nature. This means that while both types of investments have the potential to make good returns, commercial properties are more likely to lose money.

6. Identify Any Issues You May Face

As with any type of investment, there could be some issues you will face as you purchase real estate. The first complication could be finding the right property for your needs. If you’re looking for a specific location or type of real estate, then this may limit the properties available to you and drive up prices.

Although you should deal with a licensed real estate broker when purchasing any type of property, this becomes even more important when it comes to commercial real estate. In most states, anyone can work as a private seller without having specific training or licenses-so unless you’re dealing with an actual broker, there’s no guarantee that the person you’re buying from is actually the real owner.


Although this article does not cover all of the issues you may face when investing in real estate, it covers 6 key points every prospective investor needs to know about. Remember that while this type of investment can be highly profitable, it can also be risky, so it’s important to identify any issues that may arise beforehand.

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