Investing in real estate is an attractive option for new and old investors alike. However, no matter where you fall experience-wise in investing, it’s crucial that you go into real estate investment understanding a few important factors. If you’ve been presented with a new opportunity for real estate investing, here are some things you should be sure to consider first.
An important thing to remember in real estate investing is that the process can sometimes take some time, so be realistic about when to expect a return. The purpose of your investment is to build your portfolio and increase your cash flow, so if you need to do that quickly make sure you’re not investing in a property that will take too long to see a return.
The due-diligence phase itself can take months rather than days, and if renovation is involved, you’ll need to factor in the time to do that properly as well. It can take months or even years to get specific building permits, so when you’re considering your investment be aware of time frames for city and other government approvals that may be needed.
The location of a real estate investment property is another crucial factor. No matter how incredible the property ends up being, if the location is undesirable it will be extremely difficult to make a good return. Areas with high crime rates or no commercial prospects will be difficult to sell or lease.
It’s also important to consider the trends and demographics of the area where the property is located. Do your homework about the area and talk to local agencies to make sure you understand the civil engineering and environmental limitations or requirements of the area.
A good investor knows the market trends and takes advantage of them accordingly. Make sure you understand fundamentals like vacancy, rent, competition for home sales, and more to make sure you’ll get a high return on your investment. Understanding the market makes it easier for you to diversify your portfolio and quickly identify good potential investments.
Pay attention to indications of recession or other economic downturn, because this substantially impacts how quickly you’ll be able to make a return on your investment, whether you plan to lease your property or flip it and sell. Make sure the properties you consider will be able to survive downturns so that you can recover more quickly.
Property Value and Type
It’s important to remember that even after considering the market trends and demographics of an area, not all properties will be valued the same in an area simply because of the type of property. Some areas may be hotter for residential sales while others will be better for commercial. Make sure the property you’re considering isn’t overpriced and that risks are low for that type of property.
Current Financial Health
Very few real estate investments have a guaranteed return, so it’s important to be cautious financially and take into account your current financial health. Don’t stake everything you have or take out loans that you’re not certain you can recoup or pay back. If you are short on capital and want to take out a loan, make sure you understand all the terms and find a lender who specializes in the type of loan you need. Contact Investor Loan Source today to learn about the different loan options available for your investment.