Finding Loss Leader Investments

Looking to invest in real estate but unsure where to start? Many people look toward residential real estate but have a hard time finding the right investment. As a new or even seasoned investor, it may seem counter intuitive to invest in a loss leader but these types of homes can pay big dividends in the long run. In new residential developments, loss leaders are those homes that cost more to operate on an average monthly basis than you can bring in with rental income but they are solid investments for the savvy buyer since over the long haul the renters will be paying the bulk of the investment. Here are 3 ways you can find the right loss leader investment in new developments.

Decide on the Right Type of Property 

Like any home purchase, finding a home in a well sought after area makes for a solid investment. If it is a stand alone home or townhouse you are investing in, look for a home near good schools, green space and other areas that are family friendly. If you are looking to invest in a condo, finding one that is near a walkable city like atmosphere is essential. Finally, if it is vacation home you are looking to purchase, be sure the infrastructure is there to support your purchase with things like a well respected property management firm and other vacation amenities. 

Determine Your Risk Tolerance

When purchasing a loss leader, you need to keep in mind that the property may not be profitable for some time. In this case, you need to determine if you are able to support the purchase of the home until it does become profitable, keeping in mind that you may not recoup your costs until the property sells. If you can see the long term viability of the property as an investment when you sell it then you have made a good investment.

Network with Real Estate Agents

Talk with professionals in the area especially a neighborhood specialist. They can give you the inside information about the neighborhood including infrastructure developments and other proposed building in the area that can affect housing prices in the short and long term. 

As with most investments, you will have determine how long you are willing to tie up your money. The longer you are willing to maintain your investment, the more profitable it will be in the long run.