Purchasing investment real estate can be an excellent financial opportunity.Long-term financial planning usually suggests primarily stock and bond investments, but real estate investing has significant advantages too. Using real estate as a long-term rental property, fixing up an existing property and reselling it for a short-term gain (aka “fixing and flipping”), or developing vacant land can all be viable alternatives for real estate investing. These may all be tempting, but is this the right choice for you? Here are some important factors to consider when making your decision.
What are your Goals?
People get into property investment for a variety of reasons. One of the most common reasons is to secure a financial future for themselves. Specifically, owning rental property may allow you the opportunity to retire early from your day job and live off the annual return on your investment. Fixing and flipping a house might turn into a lucrative, full-time job for you.
Before making any investment, you should know how it fits into your overall financial plan. In particular, property investment requires you to put down a substantial amount of capital. There is no small investment when it comes to property. Therefore, you must decide how much of your savings you are willing to dedicate to the venture.
A huge part of making that decision is looking at your short and long-term financial plan. You may have savings accounts that you wish to keep intact for one or more future events—the education of your children, perhaps, or your retirement. You may be saving up for a major purchase in the future. Or perhaps you’re just not willing to take the risk of investment, knowing that you stand a chance of not reaping the rewards.
It’s never a good idea to rush headlong into a new enterprise without laying the factors involved:
Are you Ready to Take a Risk?
One of the factors that I think that most frequently gets overlooked is the financial resources you might need to have to account for the variety of surprises that can come up throughout the course of your investment. Vacancies, bad tenants, property repairs, natural disasters are just of few things that can create set-backs.
Another factor that you will want to consider is the maintenance (or repair) of the building that you are buying. Many home-buyers overlook the idea that building maintenance and repair can be monetarily expensive, but it also requires a certain amount of expertise and knowledge. A lack of this knowledge or the willingness to acquire it, can be problematic. On the other hand, your willingness to learn some of these things can also be a great education. There are always several ways to look at things!
Being aware of and prepared for these and other issues can be a big difference maker in your possibility of having success. 5280Lend has considerable experience with real estate investment issues and can offer you guidance, advice and access to resources that will help you in making a decision about your investment. Some specific areas where we can help would include:
- Helping you analyze your financial where-with-all to execute on your plan.
- Helping you properly finance your investment.
- Helping you understand the financial performance of rental properties.
- Helping you choose tenants and the criteria to use in doing so.
- Connecting you with local experts in construction, property management, insurance and legal matters.
The real estate market is constantly changing. Fortunately, your trusty team at 5280Lend is here to help you track the trends and decide when is the right time to buy.