The purchase of an investment property is a move that’s recommended by successful investors all over the world. Most high-profile investors have at least one real estate holding to diversify their portfolio.
Investors love real estate for many reasons. First, real property is often more stable than stocks and other investment options. The price of a stock can fluctuate unpredictably, but home prices tend to shift up and down more slowly, and rarely make huge jumps.
Another plus is that real estate can be highly liquid. In many markets, it’s easy to sell a property and obtain the money you desire for another investment in only a few months.
Real estate ventures can also have their downside if not handled well. Property investing doesn’t always deliver a positive return, so you could experience a few problems along the road when you’re not prepared.
If you’re seriously interested in property investing, you’d be smart to seek the necessary education to stay in the green. Here are five essentials you should understand about property investing.
1. You’ll Need Financing
Most people can’t afford to invest in real estate without taking out a loan. If you want the best interest rate and repayment terms, you’ll need to be prepared to make a minimum down payment of at least 20 percent.
If you don’t have a lot of cash saved up for such a down payment, there are other ways to get the money. You might look for investment partners, home equity loans, fix-and-flip loans, and other financing methods to get the money you need without a lot of risk.
2. Location and Price
Choosing a great property at the right price means focusing on the location. Though real estate is performing pretty well throughout the country right now, in some places the market is significantly hotter than others.
These markets typically include touristy regions or large cities where there’s a lot of traffic and interest in homes. You’ll also want to make sure the price matches the property’s valuation.
Before purchasing either residential or commercial real estate, arrange for a home inspection and appraisal. You want to be certain there are no issues that will lower the value and potential return of your property.
3. Utilize Property Managers
Rental real estate can provide excellent passive income if you allow property managers to handle the bulk of the labor. They can screen tenants, handle the application process, collect rent, evict tenants, perform maintenance and repairs, attend to landscaping, and much more.
You’ll pay a fee for these services every month, but this will also enable you to raise the rent and earn a higher valuation for the property. Your income will be higher and you’ll do less work with the help of a good property manager.
4. Avoid Old Properties
Unless you’re an experienced house flipper who specializes in old houses, you should avoid investing in a property that’s more than 50 years old, especially in the case of commercial or residential rental properties. They’re often money pits, and you’re likely to suffer more losses than gains.
What’s more, many banks won’t offer funding for an older property or they’ll give you a higher interest rate due to the risk. In some cases, you can find an older property that’s in great condition at a great price.
It’s okay to consider making such a purchase after having the property thoroughly inspected for potential problems. If you can prove to the bank that your investment is relatively low risk, you can proceed without a hitch.
5. Take the Long-Term View
Real estate is not a short-term proposition for most investors. Though you might sell a property pretty swiftly if you have to, most find that it’s better to hold onto properties for a few years, and let them appreciate over time.
You’ll enjoy higher average profits as you gain experience and let your property appreciate with time. So for that reason, you should consider a long-term commitment.
Try not to be greedy and cash in on your investment too soon. Financial security in a real estate investment usually comes with patience and longevity.
My name is Jessica and I am an independent journalist, freelance blogger, and technology junkie with a passion for music, arts, and the outdoors. One of my greatest passions and joy is assisting communities and business owners. My utmost desire is to help people and business owners to succeed and prosper in their personal and business affairs. I share, comment, write and edit popular news stories.