Three Things to Keep in Mind before Investing in Real Estate

According to recent reports from the financial sector, more than half of Americans are current investors. Many place their hopes and finances in stocks, bonds, and other traditional alternatives. While some aren’t afraid to invest in risky ventures with the goal of reaping massive rewards, others are fainter of heart and look for low-risk, low-return opportunities. Experts recommend mixing things up a bit. For more than 28 million people, this means adding real estate investments to their portfolios. Before you invest in real estate, though, it’s important to keep a few key points in mind.

Look Before You Leap

Real estate is inherently considered a great investment because it tends to hold and even build value over time. It’s also a tangible investment. Steel tycoon Andrew Carnegie once noted that 90 percent of millionaires made their money by investing in real estate. Of course, it’s important to fully understand what you’re investing in before signing on the dotted line.

This means researching the properties you’re thinking of buying. Visit them in person, look into the surrounding neighborhoods, and perform comparative market analyses to ensure you’re paying the right prices for them. Know the property, its potential, and the local real estate market as a whole before purchasing. You can find more information on and assistance with this aspect over at NRIA.

Consider the Financing Options

Unless you’ve already made at least a reasonably sized fortune, you’re not going to be able to purchase an investment property outright. As is the case with most prospective property owners, you’ll need to borrow money. This could mean taking out a traditional mortgage, acquiring an investment loan, or certain other alternatives. At the same time, a variety of lenders is available to choose from.

Not all borrowing opportunities are created equally. Gaining the highest possible profits from your investment means spending less and selling for more. Be sure to shop around when it comes to getting a loan. Compare interest rates, down payment requirements, and other elements. Understand the benefits and drawbacks of leverage, especially in terms of the long-term risks and expenses. This will help maximize your profits.

Landlord versus Seller

Plenty of potential for profit can come from purchasing a rental property whether it’s a multi-family housing unit or a business facility. Rent provides ongoing income you can use to cover monthly mortgage payments and other expenses. Once the loan is paid off, more of the money goes into your pocket. Still, there’s always a risk of the property becoming vacant before it’s paid off. That could leave you with lofty mortgage payments and no extra income to cover them.

Purchasing a property with the intention of selling it can also be a lucrative opportunity as long as you’re able to buy low, sell high, and recoup any costs of improving the property. You won’t have to worry about finding tenants and holding onto them or repairing damage caused by renters. That being said, you’d be at the mercy of the local real estate market and its many ups and downs.

In Short

Though investing always comes with risks, many experts insist you can’t go wrong with real estate. Getting the most out of your investments requires a thorough understanding of the real estate market, the properties you buy, and the opportunities at your disposal among other factors. Having the right knowledge and resources at your disposal is the key to a successful venture.