There is no doubt that properly planned and executed real estate leverage strategies will result in profits for investors. The trick is to be sure that your behaviors are all the right ones, and the research is sound.
These risk reduction strategies will help the real estate investor to minimize the chances of a losing investment.
Look for Below-Market Rents when Purchasing
If you can locate a rental property with a significant percentage of rents that are below the going market rates, just getting the rents up to market standards will result in less risk in your investment due to better cash flows.
The ability to do economical remodel or upgrades to increase rents is also a good indicator for purchase of a rental property.
Look for Favorable Financing that Reduces Cash Outflow
Working an assumption or other creative financing solution that reduces the interest rate is a good strategy if the property isn't over-priced. Lowering your payments by lowering the interest rate will increase cash flow and reduce real estate leverage risk.
Just Make a Higher Down Payment
With all the hype about low-down or no-down financing for huge profits in real estate investing, it's not hard to get on the wrong side of an investment.
Sometimes lowering your return on cash investment is still a better solution. High debt can backfire, particularly in a period of higher vacancy or credit loss.
Look for a Property that You Can Improve Profitably
Increasing the value of a property via improvements increases equity and results in greater profits upon liquidation of the asset. Should interest rates decrease, the increased value can also be used to finance other investments or decrease debt service.
Look for the Hot Areas of the Future
Locating the area that's about to be "the place" can be quite profitable. Identifying a neighborhood that's on the front end of growth and rehabilitation puts you on the front end of appreciation in value as well.
The Obvious Strategy is to Buy Value
This one requires little explanation. The research time and effort to locate a property priced below market is usually well worth it. Starting with equity infusion just puts you that far ahead and reduces risk if market rents decrease or other misfortune occurs.