High Rise Condo Real Estate Investing in 5 Simple Steps

Everyone's always talking about investing in real estate, and investing in high rise condos in particular. However, investment real estate can mean a whole number of things to each individual investor. That's why it's so important to understand the "ins and outs" of high rise condo investments. Here's how to do it in 5 simple steps:

1) What is investment real estate to you?
People invest and buy high rises with a certain expectation of return, the "return on investment" or ROI. Your ROI better be worth the time, effort, and risk and it better be a positive number somehow. Are you playing the appreciation angle (a speculator) or are you interested in cash-flow? (an investor). Determine the capital that will be tied up in your property and compare it to the profit you think you'll make. Are you comfortable with the risk?

2) Figure out how much you can spend
For this one, remember you have avenues available to you that you probably haven't even considered. Perhaps you already own an investment property that's not providing an ROI that you're looking for, but you're afraid of selling due to capital gains taxes. Did you know the IRS' Section 1031 allows you to sell real estate that has appreciated in value with the ability to roll it all over into a "like-kind" property without paying any capital gains taxes? Also, did you know you can use money in your IRA to fund the purchase of real estate?

Your purchasing power is determined by your ability to borrow or leverage cash. If you qualify for debt service on a $500,000 high rise condo and only have $50K in the property, then your money is working exponentially and your ROI will be higher than if you paid cash for the entire purchase price.

3. What's your exit strategy?
No one can tell you exactly how well or poorly a high rise condo investment will perform in Las Vegas. Have you ever heard the term, "historically speaking"? Well, here in Las Vegas, the high rise condo market is so new, there is no "historic" benchmark. Instead, begin with the end in mind. Define your high rise condo goal. Will you flip, or will you cash-flow it out? What kind of ROI are you hoping for? And when it comes time to sell, how you will you get that done? Remember, in the Las Vegas market, you almost certainly will have to close on your deal. Some projects restrict you from selling for periods up to a year. You better be prepared to make monthly payments on your unit or face dire consequences.

4. Keep your eyes and ears open to the market
Will the high rise market allow you to cash flow out your property on a consistent monthly basis. The best answer is: "it depends". The equity you have in your property along with your expenses such as HOA dues, property taxes, maintenances, and of course debt service will go a long way into answering that question. What kind of rental program is associated with the property? Will you rent it out yourself, and if so, what's the ROI on YOUR time? Ownership has it's costs (and its profits too!) Determine the cost of carrying your condo. With a long term vision of ownership, if we assume a negative cash flow, you may be comfortable with that due to the appreciation value of the property over time. Or you may not be. Either way, you need to feel comfortable that you're at least riding an appreciating marketplace - along with a quality project as well.

5. Take some form of action, whatever it may be.
Gather all the information from steps 1-4 and take action in one direction or another. With all the information at your fingertips, the tempation is to sit on the sidelines until you learn all there is about a certain topic, which is impossible. Don't fall into the "analysis paralysis" trap. Perhaps after looking at the fundamentals, the property type, the market trend, and the area data, you determine that high rise investing isn't for you. That's okay, but get going on some other real estate investment that DOES match your criteria and take action.

Will a high rise condo property cash flow? The answer is there is no guarantee. Will a high rise condo property appreciate? The answer still is there is no guarantee. But if you make an informed and educated decision based on the fundamentals, you'll sleep better with your purchasing decision. And you'll always have a friend in the real estate world on this blog.