Its often thought that when it comes to investing, you can’t beat real estate investments. This can be true, but you still need to be wise when making your real estate investment decisions. While investment properties can be a great financial move, there is still plenty that can go wrong if you don’t understand the market, the many types of investment properties, and your current financial situation.
Get to know your financial situation
You most likely want an investment property as a way of bringing in extra money, but how much will you need, and what do you want that money for? Is the investment property to help fund your retirement? To create extra cash flow for your current lifestyle? Will you have enough assets and income to cover the deposit? If you’re investing in residential, can you afford the mortgage payments during periods no one resides in the house? Can you still cover maintenance costs?
Make sure you take a long look at your financial situation and your goals. Will buying a property help you reach those goals, or are there better investment options, depending on your overall needs? It is worthwhile talking to Precision as we can explain the options available to you and what will work best based on your current financial situation and goals.
Know the different types of real estate investments
When we think of investment properties, we typically think of residential property first, which can be a great kind of investment property. These investments are easy to understand and reasonably straightforward—you buy property such as a house, an apartment, or vacation home—and then rent it out, often under a lease agreement. Since there will always be people who need a place to live but aren’t in a position to buy, there will always be a need for rental properties.
However, residential real estate isn’t the only type of investment property. It might be a good idea to look into commercial real estate—such as office space —which tends to be more stable than residential because it usually comes with longer leases. Retail real estate is very similar to commercial but is for businesses such as consumer goods stores or restaurants. Retail real estate can sometimes provide you with additional income above the rent as landlords may sign agreements with the business where the landlord will receive a share of the business profits. Such agreements tend to be for longer periods than residential real estate, meaning they offer a more stable income.
However, other types of investment properties can include vacant land that only provides an income if you develop the land or sell it and industrial real estate.
Understand your market
Before you invest, it’s essential that you understand the real estate market you want to invest in. Real estate prices often fluctuate and can be affected by a variety of factors. A significant industrial business closing will usually lower real estate prices drastically, just as changes in government policies can affect the value of your investment. You’ll need to understand the area you want to buy in, any anticipated changes to that area, where the real estate is most stable, and any other factors that affect real estate prices in that area, like distance to schools and shops.
Investment properties can be a great way to enhance your income, but it will take a while before you start noticing changes to your bank account. The best thing you can do before investing in real estate is research, research and research. Make sure you know and understand the real estate market in that area, the types of investment properties available to you, which will work best for your needs, and what your financial situation and goals are. Doing this will help you make the best property investment decisions for you.
Get in touch with us today if you would like some help with key decisions about real estate investments, and let us discuss what will work best for you. Join the Conversation…