Real estate investment may sound easy – buy a property, fix it up and either sell it for a profit or rent it out and sit on the income. However, the practice is not for the faint of heart. Unfortunately, this complex business isn’t always as simple as it seems and may not be for everyone. For a list of questions you should ask yourself before you break into the real estate market, keep reading.
Do I have free cash?
Don’t let late night TV property gurus fool you; you need some cash to get into real estate investment. It is possible to obtain 100% financing for a property, but that kind of financing can be prohibitively expensive and come with a lot of service charges and closing costs.
Having enough for at least a 10 to 20 percent down payment will also increase your returns and reduce your overall debt load.
Am I okay locking in my money?
Property is not a quick investment and your money is no longer a liquid asset that can be pulled out and used in case of an emergency. So, if you’re hesitant to give up your nest egg, you may want to lower your initial investment to leave your family with some kind of emergency funds.
Am I patient?
Real estate is something of a waiting game. Most homes will appreciate at an average of eight to ten percent annually, but that is certainly no guarantee. If it does work out that way, it may still take time to see that overall return on your investment – particularly if the market is down or slow.
Remember, overall real estate typically is a steady and reliable investment, but it can take time. If you’re looking for quick cash, you may want to look elsewhere.
Do I have the time?
Investing in property eats up a lot more shoe leather than picking up the phone and buying a few mutual funds. With real estate investing you need to look at properties, attend inspections, oversee sales and be a real, hands-on investor. If your investment approach is limited to making transactions on your laptop and phone, purchasing an investment home is probably not your cup of tea.
Do I have the energy?
Whether it’s dealing with tenants and property maintenance or putting in the sweat equity needed to improve a property and get it ready for a profitable sale, that all takes energy. Before you jump on the real estate investment bandwagon, ask yourself if you have the time and energy to take on the job.
Is real estate exciting?
Do you get excited about property? Does nearby competition make you want to attend their open house? Do you see real estate as a market with ups and downs or does the process bore you? To succeed at real estate investing, it should to excite you – or at least stir the motivational juices.