Real estate investing for beginners includes some important concepts regarding the amount of capital available to invest and the earnings desired to make the investment worthwhile.
While these figures are solely subjective and can completely differ from instance to instance, there are primarily two types of investments to be considered: value added investments and value driven investments.
Value added investments are going to provide more significant returns, particularly in the long run, since the risk is usually higher. A standard value added property will produce a 12% to 25% return on investment depending on exactly how long it takes to optimize its value.
Value driven investments are secure financial commitments backed by constant leases with intermittent rental increases which will give you a return in the 6% to 14% range based upon the demographics, marketplace, age of investment, tenants’ credit rating, etc. These properties will generally become more competitively priced the larger they are as institutions will compete for the larger ones (over 100,000 square feet).