Real estate has become a popular type of investment these days, and for good reason: there is no question that there are guaranteed returns when you invest in real estate. However, there are things that you must consider first in order to make a profit from your investment.
Here are some tips you should consider before investing in real estate:
1 . Assess your financial status.
It has always been a rule that before investing on anything, you must first be sure that your financial situation is in order. This may require consolidating or refinancing an existing mortgage. When you are investing in real estate, you must be financially stable with enough cash and savings, monthly income, and still be able to loan money from banks. Why? Because investing in real estate can have a huge impact on your financial stability.
When you first invest in real estate, you will be putting out a lot of money in the investment before it starts to generate income, which will, in turn, depend on how you choose to use that real estate investment. You can choose to rent it out, use it for yourself, or you can improve it and sell it.
If your financial status is more than good, you can immediately start investing in real estate. These days, it is so easy to find rental real estate properties, such as Atlanta investment properties on Roofstock, that are good investments because they are already being rented out.
2 . Make sure your credit rating is in order.
In order to make your first investment on real estate, you will probably have to take out a mortgage on it. Make sure that your credit score is good enough to get you that mortgage you need.
If you are not sure about your credit score, check it and get a copy from any of the three major credit reporting agencies. If your credit score is not good or not high enough to get a decent mortgage, then perform some corrective measures to get your credit score up.
3 . Think hard on what type of real estate property you want to invest in.
There are different types of real estate properties you can invest in and they each have different pros and cons.Here are some of them:
- Residential – Houses, apartment complexes, townhouses, and condo units all fall under residential real estate properties. They are the most popular type of real estate investment because it is not that expensive compared to others and the return, although not substantial, is consistent. Afterall, shelter is a basic need for anyone, so you will not be short of possible tenants for your residential property.
- Commercial –This type of real estate includes skyscrapers and small and simple office rentals. Since this type of property is often rented out to companies and business owners, it is normal to have multiple-year lease agreements. The good thing about this is that the inflow of profit will be steady. However, the rate of the rent will be stuck for a few years, too. So if in the duration of the contract there were multiple rate increases, you can’t increase your rate because of the lease agreement.
- Industrial –Industrial real estate properties can range from storage units, warehouses to any real estate used for different purposes during a period of time. The lease agreements are often lucrative for temporary use of the property. However, there are high chances of vacancies when the economy is not in great shape and businesses flop.
- Retail – This includes shopping malls, mall strips, and retail front stores. The lease agreements on these types of real estate are very profitable. Tenants often sign multiple-year lease agreements and pay a certain percent of their sales on top of their rent to encourage the property owner and manager for the proper maintenance of the place.
- Mixed-Use –This type of property is any building that rents it out for multiple uses. It is a great way of diversifying your income. For example, if you have a building with multiple floors, and you use the first floor to rent out as retail stores, and the upper floors as residential or commercial spaces, then you have yourself a mixed-use real estate property.
4 . Location is everything.
For real estate investments, location is very important. For example, if you are looking at properties to invest in as a residential property, then you should be looking at properties that are near the city but are also near good schools.
For retail or commercial real estate investments, you want them to be at the center of the city where all the businesses are operating, as well as restaurants.
Operating the right type of real estate in connection to its location is important in order to maximize your profits. So always do your research before diving in.
5 . Condition of the real estate market.
There is always a perfect time to buy or sell properties in order to increase your profits or save you some money when you are buying. So if you are investing in real estate, it is important that you know the condition of the market.
Investigate and observe the trends. Are the prices of the properties in the area increasing? Then that is the perfect time for you to sell the property in that area to maximize your profits. However, it is probably not the best time to buy some properties. It would be better to wait it out or look for other properties in a different area. You do not want to buy properties that are priced so high when their value can depreciate fast when the bubble bursts.
On the other hand, when you see a trend of prices going down, that is the time to buy properties for investment. You would like to wait out on selling properties at this time, especially if prices are lower than you expect compared to the amount you paid for the property in the first place.
If you want your investment in real estate to become successful, always do your research first and be clear about what your goals are. Remember, real estate is a marathon, not a sprint.