So how does one determine whether they’re cut out for the trials and tribulations that accompany an investment in real estate? Ask yourself the following questions and determine if the responsibilities and monetary strains inherent to real estate ventures will fit into your current schedule and financial parameters.
Do You Have Plenty of Capital?
Seeing profits from your rental business can take a while, so if you don’t have capital to sit on while you wait for your return on investment, you might want to reconsider. To build wealth in real estate, you’ll need a bevy of patience. Profits usually turn up after a few years, and you may need to scrape by for the first few months, and possibly even the first few properties. From the mortgage to repairs to paying off property managers, the money will be flowing out of your wallet, and it could be a while before you see it mosey its way back in.
Are You Home Repair Savvy?
Think back to all of the repairs and maintenance issues that have come up during the last few years in your personal home. Now consider that multiplied by the amount of properties you plan on investing in. If you plan on renting out your real estate, you’ll be charged with creating a habitable, safe environment for your renters. Should a plumbing issue come up, you’ll need to get over there to fix it as quickly as possible or hire a professional plumber. Perhaps the air conditioner breaks on the hottest day of the summer—you’ll need to scramble for a solution to ensure your tenants are safe. If you work 50-plus hours a week, have a family, and already find yourself strapped for time, be aware that real estate requires copious amounts of it.
If all of this responsibility sounds too time-consuming for your lifestyle, you’ll need to consider the merits of hiring a property manager to handle the day-to-day operations of the property or properties in question. Keep in mind that these services can cut greatly into your rental income; the payoff is sometimes worth it, however, as property managers have extensive knowledge on local laws and regulations and will deal with the nitty gritty and sometimes unappealing facets of the rental process.
Are You Interested in Diversifying Your Portfolio?
Do you currently only hold stocks and bonds? It’s important for savvy investors to diversify their portfolios to help minimise risk. By allocating your money and capital between varied industries, you’ll lessen the chance of financial harm; should a dissatisfactory event happen in one industry, your other investments won’t suffer, even with diversification you need to be doing detailed due diligence to further minimise your overall risk. Real estate is a great, easy way to diversify your holdings and vary your assets with one fell swoop. While risk can never be eliminated wholly, the proper diversification can help reduce volatility and give you peace of mind along with the opportunity for capital gains.
Are You Educated on the Real Estate Sector?
If you have no former experience in the real estate sector, you’ll need to do a lot of research to make this a viable investment choice. That means speaking with current landlords, other entrepreneurs who have found success (or maybe failure) with their real estate ventures, and taking seminars that can give you the rundown on any questions you might have. You’ll need to understand the ins and outs of finding and purchasing a home below market value (this way it’s easier to turn a profit quicker). You’ll also deal with the sometimes horrifying process of placing tenants in a home. Remember that these people essentially make or break your income, so it’s important to place someone reliable who will be on time every time with the rent. In any case of rental situations, it’s always important to screen tenants, so use a company like www.mysmartmove.com to ensure you don’t hand the keys over to a convicted criminal or serial squatter.
There are so many aspects of real estate investing, and if you’ve run into some roadblocks after asking yourself these questions, you may want to take a long moment to consider your investment options. Real estate can be a lucrative and profitable investment choice, but make sure you’re prepared for the responsibility and capital that go into this venture.