If you’re looking for a solid way to turn a solid profit from an investment, look no further than the real estate. Owning property or properties and renting to tenants can make you lots of money when done right. Like any investment, there are risks and gains.
Investing in rental property takes more work, time and management than other cash-value based investments. You will have to be prepared to commit a little more effort to maintaining your investment than say mutual bonds or stock portfolios, but there are potentially bigger returns offered by real estate.
Real estate appreciates in value with inflation. More inflation means more renters, since the affordability of homes is impacted. Making improvements on a property without exceeding the cost is also highly profitable.
If investing in real estate appeals to you, then listed below are the top 5 signs you are ready to invest in real estate:
You’ve got cash to invest.
In order to invest successfully, you will need a good chunk of cash lying around, or a dynamite credit score. Even in a buyer’s market, you will need to put down an average of 25% down in order to secure a loan from the bank for property. Tap into your savings account, but don’t go too deep. Banks will need to know that you’ve got unexpected expenses covered like maintenance or vacancy.
Be smart, and look for property that you know can work for you. Things like condition of home, location, crime rates, curb appeal and the age of a home will affect your bottom line, so outweigh all the risks as best as you can before making a decision.
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You’ve found a property that will yield you profit.
When you find a property you are interested in, don’t be afraid to look at other homes on the block that are similar. Go to open houses or call other landlords as a potential renter to get a feel for how much the average rent is compared to your potential property.
Typically, you can charge about 1% of the total mortgage property price for monthly rent. A property purchased for $80,000 means your tenants will pay about $800 a month. Try to take into consideration that your tenants may not always pay on time and round down to cover the cost of maintenance.
Making a house a home is expensive, but can increase your property value. If your property is a “fixer-upper” ask yourself: Will changes in curb appeal, structural refinishing and new flooring add to the value of the property? If your answer is “yes,” then assemble a crew to swing sledgehammers, hang up the chandeliers and watch the money roll in.
You’ve got time.
Making your property worth the time and effort takes patience. Real estate is a very hands-on investment compared to stocks and bonds, which can rise and fall without your seeing it happen directly. Owning real estate is often compared to running a business. You may sit in limbo for a month or two without tenants. Construction and renovations may be pushed back due to weather, slow workers, or contractual overbookings.
You may have to inspect a leaky roof or a busted pipe at your property at a moment’s notice, so make sure you are readily available to deal with the unexpected. Seasonal issues will always affect your tenants, so take the time to educate yourself about real estate and the communities your property resides in.
You’ve got a solid team.
Finding the time to look into a lawn crew, a trustworthy realtor, an attorney, plumbers, or an efficient, low-cost electrician is paramount to keeping costs down and profits up. If you’ve got real estate in areas not near you, hire a property manager that you can trust to keep your investment running smoothly.
Have your crew assembled before you purchase property to save you future headaches.
The market is in your favor.
According to economists, the housing market is still in recovery, which means home prices are ripe for the picking with lower interest rates than ever before. Loans are easy to secure with a good credit score, and foreclosed upon properties are everywhere. Scout your local area and find the property that fits your budget.
Owning real estate can be a rewarding, profitable investment if done correctly and with a positive, focused attitude. After a short time, you will see all your hard work pay off and you can start saving for all the things you’ve always wanted but could never afford. Invest smart, start looking today!