In many investments, the best way to maximize profits is to tie up capital in high-value accounts, stocks, or other such investment. Many people may be tempted to take this approach in real estate investment. However, just because a house is worth $100,000 more than another, doesn’t mean you’ll make any more profit. What is certain is that these high-dollar properties will be much more headache and have much higher fees associated with them than lower-dollar properties.
High-dollar properties are more likely to be on the market for a long time, especially in the soft economy prevalent in the United States for the past several years. While many people may dream about owning that million-dollar house on the beach, only a minute fraction of the population can come close to being able to afford such a luxury. For every month you pay for a property’s upkeep and pay interest on your investment loan, your overall profit on that property is decreased and the effort that has gone into it severely increased.
Minimizing expenditures is always the first step to a successful investment. The higher the price of the original property, the more money you’ll have to spend on interest payments for an investment loan. Even on interest-only payments for the couple of months it may take to fix up the property and hopefully sell it, this can put quite a dent in the pocketbook.
This is not to say that a high-value property is never a good investment. For the most part, only experienced investors who know their market well should consider the risk of high-dollar properties. Novice investors are often better off finding average-sized family homes in decent neighborhoods for a safer investment. These homes are generally in higher demand and are within reach of the average homebuyer.
High resale values do not always translate into higher profits. These properties are generally larger and require more upkeep over longer periods of time for the average time on the market. Smaller properties may put a smaller chunk of cash in your pocket, but when weighed against expenditures and the amount of time before you can go on to the next investment, they are generally the safer and more profitable way to go.