Historically, buying and holding real estate has been an excellent way to invest your money for the future. For example, look at the prices your parents and grandparents paid for their homes versus the prices those same properties sell for in the market today. However, investing in residential real estate is not without pitfalls. Buying the wrong property in the wrong area is a sure way to lose your money and create a lot of headaches for yourself in the process. To avoid this fate, here is a list of tips other real estate investors have used to ensure their investments grow with less risk:
Tip: Think Long and Hard About Becoming a Landlord and What that Entails
Though you may like the way real estate increases in value over time and may want to take advantage of this trend to increase your net worth as you age, you need to really think about what becoming a landlord really entails. For example, ask yourself these important questions:
- Do you like making repairs around your home?
- Do you like interacting with other people?
- Do you mind if people call you on the weekend to complain about something that's broken in your rental?
If you like to make household repairs and don't mind your renters bothering you when you are spending time with your family, then becoming a landlord might be for you. However, if you are not handy and don't want to be bothered by your renters on your time away from your day job, then becoming a landlord may not be right for you.
Tip: Ensure You Have Plenty of Extra Resources for Unforeseen Situations
If you still have student loans or other debt, then buying investment real estate is not advised until you get it paid off. The reason is simple. Just as your primary residence will periodically have very expensive unforeseen costs for repairs such a new furnace or roof, so too will your investment properties. If you do not have ample cash stores to cover repairs and expenses for both your primary and investment homes, then you will find yourself running up expensive debt on credit cards to cover the bills. To be a successful real estate investor, you must have enough money readily available to cover any expenses that may arise.
Tip: Understand the Local Real Estate Market and Its Future Projections
Finally, before you pull the trigger and purchase rental real estate in your local area, you must take time to read the professional reviews of your local market. For example, is the area on the upswing and likely to earn you money over time? Is the area declining and your investment won't grow very quickly or at all? Knowing the professional reviews will help you make a better decision for your investment dollars. Check out review platforms for real estate, such as CrowdDD LLC, for more information.