You’ve heard that putting your money into real estate is a good move. You’re investing in something tangible, something that everyone needs. It’s good to feel like you can earn money while providing a necessary service.
As tempting as it is to jump right into real estate investing, you really need to think carefully about whether it’s a good fit for you. Some people are naturals at it, but it’s not the right move for everyone.
We’ll help you think it through with the following questions.
Looking for an Easy Investment?
As long as you have the money for a down payment, investing in real estate can be fairly simple. Essentially, you look at the mortgage you’ll have to pay to the bank and the amount you’ll be able to charge for rent. If you take in more than your mortgage and other running expenses, it’s a pretty solid investment.
This basic rule applies whether you’re purchasing a single-family home or a multi-unit apartment building.
Of course, some investments are better than others and you can learn those techniques as you grow your business. But it’s easy to get started in real estate.
Can You Keep Your Emotions Out of It?
Shopping for your own home is an emotional process. You’re looking at all of the little details and imagining what your life is going to look like in a home. When you’re buying to invest, though, you need to keep your emotions out of it.
For instance, you’ll want to select floor plans that will appeal to the type of renter you’re hoping to attract. If you’re building a home or making some renovations, you don’t need to spend a lot of money on upgrades no matter how great they look.
At the same time, you don’t want to skimp on materials because you don’t want things to break down. Additionally, when you look at the area where a property is located, you have to think about whether or not people will want to rent in that neighbourhood.
If you can keep a level head as you evaluate properties, you’ll be in a good place.
Are You Looking for a Safe Retirement Plan?
Real estate investing is an excellent choice for those who are looking for investments that will pay out during their retirement years. The stock market can be fickle, and if there’s a sudden decline in the market, your investments aren’t secure. You could lose almost everything overnight.
With real estate, though, you’ll be able to earn more regularly. If you have several income properties and have paid off the mortgages on the homes, you could be earning thousands of dollars a month.
How Much Money Do You Have?
One factor of real estate that some people find daunting is that it can involve a significant amount of money upfront. You need at least 20 percent of the cost of the property you want to buy as a down payment. In many cases, this means that you’ll need $50,000 or more to buy that first property.
If you don’t have that much cash on hand, there are other easy to get that money. For instance, you can look into taking out a HELOC on your current home. You could cash in some paper investments you have. Some people even look for a JV partner to invest together.
Once you start making money on your first property, though, it’s easier to buy more because you’ll have more equity to pull from.
Will You Qualify for Financing?
Do you have enough money to purchase the home outright? It’s okay if you answer “no” to this question. Most people don’t and will need to take out a mortgage.
Lending rules tend to be a little tighter when it comes to investment properties. You’ll need to have good credit and, as mentioned, a 20 percent down payment. You’ll also have to show the bank your business plan and how much money you expect to be able to get for renting out the place.
These things make it more complicated to get the financing you need for your investment but it is well worth it when you start generating easy income, month after month.
How Much Time Do You Have?
You also have to think about how much time you’re willing to put into it. Real estate investing is often touted as a way to earn passive income, but you need to put in some work to find tenants, and you’ll be the first person they call when things go wrong.
And things will occasionally go wrong.
If you don’t want to deal with these types of hassles, you can hire a property management company. You’ll pay for the service, so it takes some of your profits, but it definitely makes your life easier.
On the other hand, if you’re willing to put in a small amount of work to handle these problems, you can keep more of the money that you earn from renting out your properties.
The choice is yours.
Investing in real estate is a long-term plan. Unlike what you see on home renovation shows, you’re not going to see big profits right away. However, the sooner you get started, the sooner you can start building your real estate empire. The time to get started is now.
At TriUrban, we specialize in helping real estate investors build a real estate portfolio that will give them the lifestyle and financial freedom they desire. Book a consultation to go over your options today.