These risk reduction strategies will help the real estate investor to minimize the chances of a losing investment.
1. Look for Below-Market Rents when PurchasingIf 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.
2. Look for Favorable Financing that Reduces Cash OutflowWorking 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.
3. Just Make a Higher Down PaymentWith 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.