It seems like more and more people are investing in real estate lately. Buying and owning real estate is an investment strategy that can be both satisfying and lucrative. One of the primary ways that investors can make money in real estate is to become the landlord of a rental property. Another way is to become a house flipper – an investor that buys undervalued real estate, fixes it up and then sells it for a profit. These are two common ways to invest in real estate. A third option is by investing in a real estate investment trust (REIT). A REIT is for those investors who want real estate exposure in their investment portfolio without having to enter into a traditional real estate transaction. If all goes well, investing in real estate can help you build wealth and generate passive income. Are you considering venturing into the world of real estate investing? Here are some things to consider before getting started.
Define Your Goal Are you looking for passive income? Long-term wealth? Or do you want a place you can rent out and occasionally use for vacationing? Your goal will ultimately determine the best investment strategy to pursue.
Set a Budget How much can you afford to pay for the property? Keep in mind that there will be monthly costs such as maintenance and repairs, as well as other monthly costs. Before making any real estate investments, map out the financials, both upfront costs and expenses expected for the long term, and even plan for those unexpected surprises.
Consider the Location Real estate is all about location. You’ll want to choose the location of your real estate purchase carefully by looking at market data like prices, rents and booking rates. (Reach out to your realtor for help gathering this information.) You should also consider how often you’ll need to be at the property. Are you in a position to go to the property when repairs are needed, or can you hire a property management company to do the work for you?
Prepare for Potential Challenges There will likely be hurdles along the way, so do your best to anticipate them. Consider scenarios such as if your tenant stops paying rent or a short-term rental guest trashes your home. Be prepared for a big repair and have cash on hand to handle these repairs. Create contingency plans for any issues you can think of. Ready to find the perfect property to rent out or flip? Reach out to your realtor to discuss what you’re looking for.
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