Until a couple of years ago, real estate was not seen as a type of asset class worth investing in. Most people didn’t consider that property investment was a profitable way of diversifying a portfolio. That perspective has changed though, and increasingly more investors are now looking at buying property in the hopes of making a good profit in the future. The real estate market may seem like a challenging type of investment because there many risks involved. Sadly, very few people can afford to take them.
There are many ways someone can invest in property. The options you have available are:
- Buying shares in property investment trusts
- Investing in property with the assistance of an experienced company
- Buying property outright
Each of these options comes with positives and negatives; owning a property doesn’t just have financial benefits but also emotional ones. It gives people reassurance that they have an added asset with great investment potential.
Analyze your candidacy
Just like with any other type of investment, real estate comes with challenges and risks not everyone can accept and overcome. An investor must assess the risk tolerance, overall asset allocation, and liquidity really well before making the decision to go ahead and make the purchase. As opposite to traditional investment selections, buying property comes with unique challenges. If you can get pass them then you have the highest chances of reaping good profits. Do you have the time, patience, abilities and organizational skills to manage a property? Make sure to answer yourself this question before spending any money in advance.
Determine how much you can afford to spend
As soon as you’ve made the decision to become the owner of a property, your next step would be to settle on an amount you can afford to spend. Be reasonable and try not to go overboard. Figure out how much you have available to make a down payment, and don’t forget about closing costs and reserves meant for future property expenses. Now that you have settled on available funds, it’s time to contact a skilled realtor that can help you learn more information about advanced loans you can get as well as current lending parameters for various property types.
For instance, prices for condominiums were hit really hard by the recession in the last couple of years. Many lenders had to tighten their standard or even stop lending altogether. Whereas spending money on rental condominiums might seem like a good idea now, an investor can’t know for sure that the market will recover and make this type of property investment seem profitable ones again. Also, you may be forced to complete a larger down payment or even deal with higher associated interest costs.
Property location is fundamental
After having determined a price for a property you can actually afford, your next move is to assess available lending options and the location. It is crucial to buy a house for investment in a good area; otherwise you may struggle to find fair tenants or any tenants at all. Check auction.com, craigslist.cm, propertyturkey.com or loopnet.com to identify properties, and if you’re having any doubts consult a realtor for more information. A professional in the business has the expertise and knowledge to point you in the right direction.
After you’ve purchased a property, you must decide whether you have time to manage it or you’d rather hire someone to do it for you. In case you have enough time and expertise to do it by yourself then you could consider signing up for local property owner’s association. This way you’ll know more about landlord responsibilities as well as receive advice on property management from other owners. If you think that hiring a professional is a better idea, make sure to interview more than one realtor or company. It is important that you find the best fit for you and your budget.
Owning an investment property can be an extremely rewarding experience. However, before making a purchase you should assess the market really well. Don’t do anything unless you’re 100% sure it’s the right thing to do. If you lack expertise in the area, hiring a realtor can help you save a lot of cash.