For any worthwhile investment, you have the potential to acquire lucrative returns. However, every investment also comes with risk that can cut into your revenues.
When it comes to real estate, you want to plan your investment around existing factors to best mitigate potential losses. That means careful planning as you consider a host of important items.
Here, we’ve assembled these factors into a list to help you plan for every inevitability before you jump in the real estate game.
1. Assess Your Investment Goals
There are virtually infinite possibilities when it comes to investing. Each one comes with different positives and negatives, overhead and investment schedules, considerations and planning. When deciding on an avenue for your real estate investment, you want to consider what exactly you want out of a property.
Are you looking for a quick return? Then renovating and flipping a property may be more your style. Are you looking for income over a long period of time? Then investing in a rental property may be more desirable.
There are plenty of options and end goals to think about. Determine what best suits your needs and lifestyle for a real estate investment that will truly pay off.
2. Budget All Expenses
You may feel ready for your real estate investment. Maybe you’ve saved enough for a down payment and are exploring your financing options. Before you look further, however, be sure you take into account all the associated costs of investing in real estate.
For those looking to modify a home and turn it around for a quick return, this will mean budgeting for every renovation. Consider the time it will take to transform a home, how much of the work you’ll do yourself, and how much you’ll delegate to contractors. Every improvement to a home comes with a price tag. Budget these into your plan before you seek financing, and don’t forget closing and carrying costs.
For those looking to rent out a property, there are many costs to consider as well. Every property takes consistent maintenance, cutting into your revenue stream. Additionally, you have to consider the legal expenses that can occur when renting out a property and potentially processing evictions. Finally, vacancies, property management fees, and other improvements are all factors to think about when itemizing a rental property budget.
3. Examine Your Financing Options
Perhaps you’ve purchased a home you’ve lived in and feel confident in your understanding of mortgage lending. However, purchasing an investment property isn’t quite the same.
First, when borrowing for an investment property—one you don’t intend to occupy—the rules on private mortgage insurance are different. You will be required to put down at least 20% of the property value when purchasing. Sometimes, this can be as much as 30%.
The event of the coronavirus pandemic has caused many borrowers to tighten lending requirements. In some cases, new investors will be required to pay cash for their first investment property. Take this into consideration before you seek out financing options that will work for you.
4. Find a Thriving Market
The success of any investment property is reliant upon its location. Not only do factors like nearby schools and neighborhood metrics play a huge part in this success, but so too does the state of the local housing market overall.
First, you want to look for cities and neighborhoods in which prices are consistently on the rise, where demand is high, but where there is still plenty of room for growth. This will help you cut down on vacancies if you are renting, or can make sure your flipped home gets a buyer fast.
Then, you can look at neighborhood quality overall. Are schools in the area well-rated? Are they close? What kind of amenities and features does the location offer that will keep renters or buyers interested in the property? Once you’ve found something in a thriving market, you can plan for a successful investment.
5. Don’t Make a Decision Alone
Finally, you should never make an investment decision alone. This is especially true with real estate. Plenty of time and consideration should be spent to all but ensure that your investment will be a beneficial source of income for you or your family, and professionals are here to help.
Speak with accredited realtors and financial professionals to help you get the best possible understanding of your investment endeavors before jumping in. Whether you are flipping a home, planning to rent long-term, or even buying a home to live in it yourself, the advice of professional real estate and finance against can set you on the right track.
Before you begin your real estate investment journey, thoroughly consider these five factors. From assessing your goals to finding help, a real estate investment should be a calculated and helpful process that sets you on the path to financial independence.
For more information on real estate investments and property management, contact 208.propterties today.
