What Every Real Estate Investor Should Know
There are many things to consider when deciding to invest in real estate. First, what type of property is best for you? Every investor is different and every investing plan is just as unique. Once you determine the type of property, you can start considering what is available in your market.
To help you get started, consider these factors, but remember, each person is different and the answers should be considered as a whole before deciding which direction to look.
What are your long-term goals? If your long term goal is passive income, you want to consider holding properties for longer. If your long term goal is maximum income regardless of how much time is required, you may be better off with shorter term purchases that net higher returns.
Where are you financially right now? How much cash do you have on hand and what is your credit like? Consult with a qualified lender and see what programs you qualify for. If you have the cash available, you need to decide if you would like to utilize the cash or leverage it with a loan.
Do you consider yourself a high risk or low risk investor? If you are a high risk investor, you might want to consider leveraging your cash to buy multiple or larger properties. Talk to your lender before deciding what is right for you. High risk investors tend to enjoy larger deals, meaning multi-family and commercial properties. You might also consider vacation rentals. If you are low risk, you might consider a new home. New homes tend to come with home warranties in place and there is less fear of repairs being needed. When you purchase in an early phase you can often build equity quickly and will find them easier to rent or sell.
Are you typically hands-on when things need fixed, or do you just want someone to take care of it for you? If you like to be hands-on and are good with repairs around the house, you can anticipate more income with rentals and fixer-uppers. Just because you prefer to have someone take care of it for you though, doesn’t mean you should rule either of these out. Simply take the cost of repairs into consideration when you calculate your net sheet for a particular investment.
Are you good with people and do you like working with them? Now this is a tricky one. Many of us are good with people, but do not like working with them. If you do not like working with people, for your own sanity, stay away from traditional rentals. Stick to properties that you can flip and can use a professional to handle dealing with buyers or utilize a property management company. Commercial may be a better fit if you do not like working with people. While you are dealing with a person, it is on a professional basis and your interactions will remain on a professional level.
What is the market like? This is where you will need some help. Seek the advice of a local realtor, read the real estate sections of your newspapers, and research online. Markets shift quickly, so make sure you are using up-to-date information.
Finding the perfect investment will take a little work. Be sure that you consider all factors to ensure that you are happy with your choice. Once you have set some parameters, put together a plan that spans several years. Research and planning make the difference between a successful investor and someone who just tries it out.