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.
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:
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.
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 of 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.
Before you buy property in another area, you should research a few key aspects of the neighborhood. Some questions you should ask include:
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.
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.
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.