There are still many who remember watching all that they had built equity-wise plummet as if overnight in 2008, which left a sting of untrustworthiness attached to real estate investing. But according to economists, real estate is generally a worthwhile investment because it generates passive income. And it can also be a good long-term plan if the value of your property goes up over time.
But some conditions make investing in real estate even more profitable and less risky. So if you are wondering whether you should use real estate investments to build wealth, these are things you need to consider first and foremost before just googling “realtor near me, ” and starting your search blindly.
Your Liquidity
In most instances, the best way to realize the greatest profits is by paying as much as possible in cash. If you can’t afford to pay it all in cash, make sure that you can, at a minimum, comfortably make the mortgage payments, assuming that you will not receive rental income at all.
The mistake that many inexperienced real estate investors make is to calculate what they “may” receive in rental income as fact. With renters, you have to consider things like high turnover rates or no renters at all. That is even more true in the COVID-19 era when vacation rentals were remanded not to rent their homes out. Although an extremely rare case, never count on money that you don’t already have in hand.
Plan out All Expenses
When you look to purchase real estate as an investment, you need to take into account all costs associated including taxes, upkeep, repairs, and utilities. Many people use property rental agents to maintain their rentals. It helps to ease the burdens and complexities that come with rentals, especially if you don’t live nearby or have a full-time career outside of your real estate investment. So although it can be more costly; for newbies, it can help navigate the rental world.
It is critical to make sure that you can cover all expenses fully on your own, without calculating any income from rentals. And you should always take the first couple of months of rental income to put in an emergency fund in case anything needs to be done. Also, insurance is going to be a must for your investment property and a cost that you plan for. Consider fully insuring your property if something happens, covering yourself is always better than losing it all.
Due Diligence
If you are buying a property with the sole purpose of turning it over in the future, read through the deed from start to finish, or have a lawyer do it for you. You have to consider things like new roads, or any other scenarios that can have things built around the property which could potentially either increase its value or, more importantly, decrease it. Once you understand all the potential things that can affect the viability of your investment, over time, you can make a more informed guesstimate about whether there is money to be made.
Since you don’t have a crystal ball, there is always the chance that you could get it wrong. But if you take the time to do the research, you will minimize the possibility that you are buying, not understanding all the circumstances that could arise once you purchase it.
Baby Steps are Necessary Before you hit the Ground Running!
When buying an investment property, it is always best to go small and grow. Some investors start by purchasing a house with an ensuite or duplex and then living at the property while renting out additional space. That is an excellent way to get a feel for whether investing in real estate is for you or not. It will also ensure that you don’t get too far in over your head. Most importantly, you can keep a close eye on your tenants since you live adjacent to them, which means you have more control.
Another reason why starting small is important is that you don’t want to be house-poor. Before you take on additional properties, it is critical to make sure that if nothing else, you have a place to stay and can afford your mortgage if the rental is a success or not. The idea is that the rental property is an investment, and as such, the money made shouldn’t be spent before it is even collected.
As you learn the ins and outs of what it means to be a landlord and how to manage your investment, you can begin to consider expanding to more investments. And if your course is to have several properties; managing them will not only be easier, you will see your profit margin increase significantly without a huge risk. Or, the potential to put yourself under a money crunch.
Don’t Just Google “Realtor Near Me,” Hire the Best!
Of all the ways that you can invest for the future, real estate has always been and will continue to be, a low-risk investment as long as you don’t get in over your budgetary head, do the research necessary to minimize risk, and take baby steps to get your feet wet before you attempt to jump right in the deep end.
At Sea Turtle Properties, we specialize in investment properties, as well as property management, and would love to help you get your real estate investing feet wet with as much hand-holding as you need. Don’t take the chance by just googling “realtor near me,” contact us today to see how we can start building a future filled with wealth and security.