Things to Consider Before Investing in Property

Investing in real estate can be lucrative and there are things to consider before investing in property. Buying and owning real estate is an investment strategy, and prospective owners can use leverage, or borrowed funds, to buy property by paying a portion of the total cost upfront, then paying off the balance, plus interest, over time. This differs from traditional mortgages that typically require a large down payment. Real estate “flippers” use leverage to purchase undervalued real estate, fix it up, then resell it at a profit. 

 

It is a way of diversifying one’s portfolio since real estate is historically one of the more dependable investments to make money. Economic factors can vary widely, and where one area crashes, another may thrive. Investing in property can insulate your risks if you invest heavily in the financial market. Real estate properties are tangible assets that typically appreciate, and as an owner, you can boost that appreciation through renovation or improvements. Most well maintained real estate holds its value, especially if the neighborhood is attractive and growing.

Investors can also make money in real estate by becoming a landlord of a rental property. Of course, an investor has to consider whether or not they want to take on that role. Owning rental properties is great for individuals who have the patience to manage tenants, as well as tackle do-it-yourself maintenance or renovations. Rental properties can provide regular income while they appreciate in value and provide tax deductions. However, income can be reduced from potential vacancies and damage to property by tenants.

It is important to research and do your homework before jumping into investing in property. Follow economic news and understand sales trends. Numerous factors can affect real estate values in any given year. Do your homework by learning as much as you can about buying and selling real estate. When it comes to actually purchasing property, it is important to do the legwork of checking with local municipalities about any issues that could arise with the property you are considering acquiring, such as building codes, easements, zoning and planning laws, and even pending building permits in the neighborhood. If you are considering purchasing property that belongs to a homeowners’ association (HOA) you will need to get copies of their bylaws and rules, and learn about their required maintenance fees. 

So, if you’re considering buying your first investment property, some tips include:

1. Evaluate your current financial situation. You shouldn’t have debt, but should have a lot of liquid savings. Make sure your credit score is good in order to qualify for the best interest rates. If your score is not good, work to improve it before investing;
2. Research the locations in which you are considering buying and the local real estate market trends.;
3. Assess the properties for damage, and estimate costs for repairs or renovation;
4. Research all associated costs such as property taxes, insurance and utilities; and
5. Start small and don’t take on too much too fast.