There are so many appealing factors to investing in real estate. Compared to investing in stocks, bonds or funds, real estate offers a less risky alternative, but still a high potential for returns. If predictable cashflow is what you’re after, real estate is for you.
For hesitant investors, real estate is a great place to begin, because it offers a stability that other means of investing can’t promise. Real estate is everywhere, so it’s easy to get involved in, and you can find plenty of support should you need it.
Yes, there are certainly benefits to real estate investing, but before you jump straight into anything, you need to spend some time deciding whether this is in fact the investment solution for you. Ask yourself the questions we’ve listed below to ultimately get a better understanding of whether real estate is something worth investing in:
What are my investment goals?
Everyone has a unique approach to investing their money, and different investment goals are often suited to different types of investments. If you’re happier to take bigger risks for higher returns, you might want to bypass real estate altogether and go for something like bonds and stocks. If you still want a good investment but with slightly lower returns and less of a risk, property is more likely to be for you. Be aware, though, that real estate investing is pointless unless you’re prepared to be in it for the long run. You need to be happy to part with your cash for a significant period of time – ten years minimum is best.
What’s my current life situation?
Before you even consider investing in real estate, you need to evaluate your own current life situation. Whether you’re single, a parent, renting or living in a bought property, and what job you have and the area you live in can all determine your stability in life. You want to make sure you’re in a position where your life isn’t going to drastically change, leaving you unable to handle your real estate investments, any time soon.
How stable is my income?
Real estate investing is a long process by nature. You’re going to need to be able to make long-term payments if you’ve secured a mortgage, and for that, your income needs to be stable. It can be all too tempting to jump into investing in real estate when business is particularly booming, but if you can’t guarantee year-on-year success, you may need to put your investment plans on hold for the time being. Many people have to take out loans to kickstart their real estate investing, which can be incredibly risky if you can’t be completely sure you can pay them back.
What’s my credit score?
If you’re looking to invest in real estate, you need to first be certain that you’ll be able to do so. Even if you have plenty of funds set aside, if your credit score is too low, you might not be open to many of the real estate investment options. Even if you are able to invest with a low credit score, be aware that mortgage interest rates are generally going to be a lot higher. Make sure that your credit score is looking good before you go into real estate investing, and you’ll be able to get a lot more out of your efforts.
Is this the right property to invest in?
When you’re investing in real estate, location is key. You might want to start small and invest locally, but be aware that you’re likely to get the biggest returns from investing in popular overseas real estate destinations, such as Hawaii. Do your research and decide which location suits you most. Make sure you have a clear understanding of the property market of a certain area, and, if necessary, the ins and outs of foreign investment, before you part with your cash.
Should I be a landlord?
Not everyone is cut out to be a landlord, and if you don’t think the job’s for you, that’s not a big deal. Landlords have to take on a lot of responsibility – aside from keeping their properties occupied, they have to be consistently available and contactable to deal with any issues that may arise. Just because you’re a real estate investor, that doesn’t automatically make you the definite landlord. If you’d prefer, you can hire somebody to take over the managing of your property for you, taking the extra pressure off your hands.
Do I need help from an outside source?
If you’ve never had any real estate experience before, it might make the most sense for you to seek help from an outside source. You might prefer to put the more difficult work into a professional’s hands and use an online real estate platform rather than purchase a property yourself. Or if you’re ready to get right into the thick of the action, a financial advisor or an accountant may be able to help you organise your funds and prepare for your investment before any key decisions are made.