When it comes to real estate investing, there are a lot of factors you have to consider. Purchasing homes, or a plot of land, is certainly not like going to the market and purchasing a carton of milk. You have to think of the current economic standing of the marketplace. You also have to think of the geographic area in which you are putting money – are the property values going to rise, how high is the crime rate and is there a good school system? Indeed, a real estate investment can sound good on paper – and even in person – but it can quickly go sour as the weight of reality sinks in. Here are five factors to consider before investing in residential real estate.
- Commitment. Investing in real estate takes commitment – not only in terms of capital, but also time. When it comes to the real estate market, you have to stay in the ring at all times – if you fall out, you will immediately lose. Staying in the ring requires being hands on – checking out properties, speaking with brokers, consulting with banks and making offers. If you don’t have the fight in you, you may want to think of investing in a different industry.
- Capital liquidity. As a real estate investor, you need to have a lot of liquidity when it comes to your capital. If you make an offer, you better be able to back it up in cash. You can easily lose a bid if you don’t have the cash ready to be wired and sent to the seller in a moment’s notice. Not only that, but what happens when the property needs maintenance, upgrades, or construction? – You should have the cash flow to complete these jobs before the investment goes downhill and you lose more money than you put in.
- Purpose. As a real estate investor – particularly a residential investor – you want to have clear objectives when it comes to what you want to do with the properties once they are yours. You could go into the house flipping market – buy a house cheap and flip it for a profit – or you could go into the rental market. Both have their unique merits – as well as pros and cons – but you want to line up your objectives before you start putting money on the table.
- Selling power. As an investor, you need a good real estate firm, like Breckenridge Real Estate Group, on your side. A real estate firm will be able to market your property and evaluate it accordingly. If you want to see your investments pay off, you’ll need the expertise of a trusted team of agents to put your property on the market and to take them off once a sweet deal has been made.
- Credit. Another important factor to consider is your credit standing. If you see a great property, but don’t have the liquidity to invest, you may want to take out a loan to put down an offer. If you don’t have good credit, though, you could lose the property. In the end, having credit will offer much more flexibility and many more opportunities for success.