Signs You are Ready to Invest in Real Estate
The old Mark Twain quote, “Buy land, they aren’t making any more of it”, is as true today as when he first spoke it over 100 years ago. A sound real estate investment can be the most lucrative financial decision you can make. There are many benefits that stem from investing in real estate. You can obtain a very valuable asset to sell in the future, secure a secondary source of income through rentals or ensure your financial stability once you retire. For the unprepared buyer, however, the risks are great if due diligence isn’t taken. A common question often posed is when is the right time to invest in a property other than their own family home. Below we look at the five signs you are ready to invest in real estate.
5 Signs You are Ready to Invest in Real Estate
- You have some savings burning a hole in your pocket- Whether you’ve started a new, higher-paying job or experienced a large reduction in general living expenses, having more cash to play around with can be a sign you’re ready to start a property investment portfolio. While you may prefer to not use existing equity in your home loan, saving your money over time to cover the deposit is often a good idea. While this may take time and discipline, putting your money to work for you will help ensure you reap the benefits down the road. Unlike with your primary residence, there are no ways to buy investment properties with little-to-no money down.
- You got that good, good credit- Much like making sure you are cash stable, going into a home investment with good to great credit will ensure you qualify for the lowest interest rate, and in return, the highest ROI. A good lender can help you predict what kind of interest rate you qualify for, and help you fix any credit issues you may have prior to applying for a loan. Your lender can also help you decide whether you should get a fixed-rate mortgage, which is great for investors since your mortgage payment will remain the same for the time that you own the house. Before investing in a property, you should be free of any high-interest credit card debt, have a stable income, and be prepared to live at least six months without any income from your new investment.
- If you have the time…- Being a landlord is a massive commitment. The time required to manage the property and address any home maintenance can scare many prospective investors away. Even if your goal is to fix-and-flip a home, you’ll still have added responsibilities on your hands. In that case, your responsibilities will include balancing budgets, overseeing contractors, and managing schedules. However, in either scenario, it’s important to remember that the passive income that comes along with buying an investment property also comes along with additional work. If after careful consideration you are able to meet these requirements, then it is a good sign you are ready to invest in real estate.
- You know the neighborhood- A good rule of thumb is to only buy properties where you wouldn’t mind living. Buying properties in nice, moderate, working-class areas where there are not too many foreclosures or empty properties is always suggested. Knowing what schools are in the area you are purchasing a property is key, as there is little more important to a renter with children than schools. Another thing to consider is your potential neighborhood’s proximity to amenities such as parks, grocery stores, shopping centers, restaurants, and nightlife. Thinking about what makes the neighborhood desirable or undesirable will help you decide whether the area will continue to be profitable in the future.
- You have a real estate agent who will be your advocate- Many buyers (especially ones who have experienced a successful closing in the past) think that they can handle a real estate transaction on their own. Because the market is constantly changing, the process may not go as well the next time. It’s always key to employ the help of a real estate investment expert when purchasing a house to ensure you make the right purchase. Leaning on a savvy real estate agent in your decision, along with the help of an experienced home inspector, handyman, insurance rep, and knowledgeable attorney, can ensure you don’t find yourself in an unfavorable real estate deal. These experts can alert an investor to flaws with the home and neighborhood, and ensure the best deal possible is negotiated.
At Fishtown Real Estate, we specialize in Residential & Commercial Sales and Rentals, as well as Property Management, and Real Estate Consultation. Contact us today at FishtownRealEstateLLC@gmail.com or (215) 427-2400!