As a social media consultant, I get a lot of questions about virtual real estate investing, and I also see a lot mistakes people make. If you are planning to invest in virtual real estate, you are going to want to earn cash, based on the type of risk you will be taking. Furthermore, you are also going to want to minimize the amount of time that you will be spending on the online property. So as to accomplish this, you will need to make smart choices before purchasing the site. As a real estate investor, your main aim should be to get as close as you can to these optimal scenarios.
With that said, here are 3 assumptions that you should avoid when getting into the real estate market (online or offline).
Thinking Virtual Real Estate is Not a Risky Investment
All types of real estate investment opportunities are risky in nature. Development of land, real estate and TIC (Tenant In Common) investments, fixer uppers, private real estate funds and other real estate investing opportunities, all have a rather risky profile when compared to the purchase of an already established cash-flow investment property. In almost all of the above mentioned investment opportunities, you might end up not getting any of your money back because so many things might go wrong. Thus, if you are planning to invest in real estate, then you should consider taking a fee simple title. Additionally, you will also be expected to test, analyze and review reports so as to make a lower-risk real estate decision.
Assuming Virtual Real Estate Does Not Require Managing or a Lot of Time
There are some properties which will require a little bit extra time and effort so as to make the great investments. Good examples include, low quality properties which are situated in bad areas, vacation rentals and college rentals. Nice and boring properties which have been rented to decent credit profile tenants for a long duration take the very least time to manage. Furthermore, treating tenants in a fairly and a more respectable manner will ensure that you maintain a healthy relationship with them.
Presuming Real Estate Pays on a Cash-on-Cash Basis
When purchasing a property, you will be taking cash out of your liquid assets, such as bonds and stock, and then investing them, in an extremely liquid asset i.e real estate. If you were earning a return rate of 4 to 6 per cent on your financial assets, then you should strive to earn reasonable cash on cash return rates. However, to achieve this, you will need to avoid those prize properties which are negative and instead purchase cash flow positive properties which will earn you decent returns.