Obviously, there are three major components to getting the biggest return on your investment. The first is the price you pay. Considering the eventual resale during the purchase process is a sign of a successful investor. The article in the link focuses on Miami, but the principles discussed are components of any investment property purchase/resale thought process.

The costs of, and the income from, ownership are critically important to the ultimate return. A question our clients often ask is how to get the most bang for their buck – besides negotiating a great purchase price on the right property in the right location. A powerful way to ensure that is to leverage the purchase.

Two Approaches to Leverage

The first, and obvious, is to take out a mortgage loan on the property. Foreign investors learn there are well-established and willing American lenders when looking for real estate loans. Domestic investors often put down 20% and borrow the rest. Overseas investors often make a 50% down payment.

The down payment may come from stock market profit-taking, or the sale of an existing property to make the most of price appreciation and the 1031 Exchange benefits. The cost of amortization is tax deductible, of course, and the tenant is there to cover the loan costs via their rent.

The second most common way is to use the equity in a current property to use as the down payment. The two ways of doing this are to take out a mortgage loan using the property's equity for security. The second way is to use a home equity line of credit (HELOC.) The main difference is that the line of credit can be used for anything and interest is only paid on credit used. It, therefore, enables a more subtle approach to look for the right investment property, and to cover the purchase costs and those of any renovation, etc.

An obvious benefit of financing the purchase is that price appreciation of the property is being funded by the down payment and the rental income. A $600,000 down payment on a $3 million property which sees a price appreciation of 5% ($150,000) means the appreciation represents a 25% return on the down payment amount.

Financing for accredited investors makes good business sense.

Using the right property manager will maximize occupancy because the management company will market the property to potential tenants, vet them, and manage the rental contract while it is active. The decision to contract out that activity often produces better tenants and higher occupancy rates. Both result in a higher yield.

The third element of getting the right return is to put the sale in the hands of a skilled and successful real estate agent who will market it correctly. The agent will help to negotiate the best price the market will bear, on the best terms for the current owner, and within the owner's preferred timescale.

Put those three elements together, including a 1031 Exchange if appropriate, and the property will generate the highest return on the investment.