Real estate can be a great investment for people who are willing to put in the work. There are several ways people can make money off of their properties — some buy homes, improve them and then resell them, while others become property managers and rent the space out to other people.
Whatever you’re considering doing, it’s important to make sure it’s the right time, both for you personally and for the housing market in general.
Here’s what you should do before you decide to invest in real estate.
Ask Yourself Questions
Real estate is a unique type of investment. To make money, you have to be strategic, hardworking and willing to take risks. So, before you become a real estate investor, ask yourself these specific questions:
Am I in a place to take financial risk?
Real estate is expensive. If you’re going to buy property with the intention of making money off of it, you have to be in a place where you can afford the down payment and the monthly mortgage, even if you have a hard time reselling it or renting it out right away,
If you have excess income, real estate could be a great way to turn your money into even more money. However, it depends heavily on being able to find tenants or new buyers, and that isn’t always a guarantee.
Do I have time?
Whether you plan to flip and resell the property or manage it for tenants, you have to be prepared to put work into it regularly.
If you plan to flip the home, you will need to plan extensive new designs for it and, if you want to make as much money off the property as possible, execute them yourself. Additionally, if you rent the property out to tenants, you’ll need to be available to conduct routine maintenance and communicate with the tenants whenever they need to.
Real estate isn’t like other investments — it requires constant attention. Make sure you have the time to take on the responsibilities before you commit.
Familiarize Yourself With the Area
Before you buy property in another area, you should research a few key aspects of the neighborhood. Some questions you should ask include:
Is the cost of living going up, down or staying the same?
If the cost of living is going down, you might have a harder time getting a return on your investment. If it’s going up, on the other hand, you could resell or rent out your property for more money than you bought it for.
Are more people moving into the neighborhood or moving away?
If more people are moving to the neighborhood, there might be a lot of competition for buying or renting homes. This gives you more leverage when renting or selling the property, and you can get a higher return on your investment. If more people are moving away, however, the opposite might happen.
Research Mortgage Trends
Buying property while mortgage rates are low might be a great idea for those who are ready. Securing a lower mortgage rate lowers your monthly payment and makes the risk lower. Mortgage rates are fairly volatile, so keeping up with the lows and highs can help you secure a loan at the best time.
Our experts at The Federal Savings Bank can help you determine if this is the right time for you to buy real estate. Contact us today for more information.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to you individual situation.
