The following tips will help make any deal an investment in real estate in these tough economic times because the recession has burst the realty boom bubble.

It is essential to make profitable deals, especially in real estate, where the profits and losses could be extreme. For inexperienced realtors, it is very important to assess any deal carefully. It is suggested to consider the following points as they affect the merits or demerits of any deal in real estate. These are cash flow, leverage, equity, appreciation, and risk, or in short, clear.

Cash Flow

It is the financial potential of the property. It depends on different factors such as the local market for rental property, whether it is a booming one or less profitable, the going interest rate for the finance, the amount required as a down payment, etc. The status of the property—whether a commercial place or a residential one, a single- or multi-family unit—also decides the rental value of the property. Remember, properties do differ in their rental income potential. Make careful comparisons of the alternatives available. Also consider how you perceive it, whether as a short-time investment or a long-time one for bigger profits.

Leverage

This is a deciding factor in a real estate deal as it could tie you down in securing the finance for the deal, or it can let you make your financial moves in a less restrained way. Certain caution is suggested while considering any property deal in the returns-making potential.

Equity

Equity attached to a property could get you a discount in the deal, or help get a better price for a property. It could be a potential fixer-upper or any rezoning plan that could prove helpful in getting a better price for your property. Alternatively, factors such as a foreclosure, a rather run-down status, or a simple discount in the price could get you the property at a profitable price.

Appreciation

Though it is difficult to decide on the appreciation potential of a property on a short-term basis, it is suggested to consider the continuing trends in the neighborhood and adjoining urban areas of the property. A property with a considerable rental/selling potential with a definite advantage of any kind of equity, and a profitable appreciation value could be a smart deal. If you want to get an estimate, there is one good trick. Request a home insurance policy, and let an expert come in to value your house for free!

Risk

It always pays to consider the “what if” factor in a deal. Several factors could turn your investment into a financial disaster, or a setback. Consider them, and make allowances accordingly so that even if anything goes wrong, there is an alternative to fall back on.

These CLEAR points will help you avoid the dangerous waters while making profitable real estate deals. It’s tough times now because people are faced with foreclosure and bankruptcy, and there’s an excessive supply of real estate in the market. On the other hand, investors are skeptical. Whether it’s your first home purchaser investment property, people are awaiting real estate rates to dip further and that’s why everyone’s anxiously waiting and watching the market.