Real Estate Investment

What to Consider Before Investing in Real Estate?

There are many experts out there telling us that right now is the best time to buy real estate. Interest rates are down, real estate development is up in many areas, and banks are lending again after the economy has started to bounce back. But just because this is a good time for investing doesn’t mean it’s the right time for you specifically.

When choosing the best time to invest in real estate, you should always consider a few key factors first to be sure that your ability to invest lines up with the market’s health for the best possible investment opportunity.

1. Stability

Much like starting a romantic relationship, both you and the real estate market need to be stable for an investment to work.

For you: How stable is your income? If you invest your savings right now, do you have a back up plan in place if you lose your job tomorrow? Being forced to rush a sale to get out from under an investment so that you have the cash won’t allow you to wait for the perfect opportunity to optimize your ROI. If you aren’t sure that you’ll be able to support yourself and pay the mortgage on your new investment (or pay for remodeling or whatever other costs you’ll have) for at least the next six months, you may want to think again about investing.

For the market: Are real estate experts mostly in agreement about the health of the market? Have there been any recent changes in legislation or interest rates that haven’t settled yet? Be sure that the market is stable as well so that you don’t find yourself stuck with an upside-down investment.

2. What is Your Goal?

Before you invest in a property, be sure that you consider what your goal is for the property. While you probably have an overall goal with your investing already in mind (such as “create a retirement fund”, or “quit my job in 5 years”), each specific investment should also have its own goal. Do you want to live in this house while you finish out your 5 years with your current job? Do you want to rent this house to start making some extra cash and grow your portfolio? Don’t simply buy a property just because it’s a sound investment on paper. Consider what you’ll do with it while it’s on the market.

3. What Does the Research Say?

Every single real estate investment article you read will tell you to do your research. Knowing the property and the area is vital to making a good investment. The reason that this consideration is so often mentioned is that it’s easy to get swept away by the description written by a real estate agent. Guess what? They want to sell the property! Their descriptions are designed to draw you in and make you want to spend money.

Before you buy, consider what the research says about the value of the property, and about the future of the area. Is it a place where a person could live for a decade? Could they raise a family there? Could an elderly couple enjoy their retirement years there? Consider every possible demographic, and really picture if they could find happiness in this property and in this area.

Be Patient

Real estate investing seems like a high pressure investment. Competitors are everywhere, and interest rates are always fluctuating. It’s tempting to go with your gut. The most successful real estate investors are those who have learned patience. As you do your research, consider your stability and the market’s, and define your goal for the property, you’ll be able to trust that you’ve made a great decision. If a property is bought while you are still deliberating, consider it a dodged mistake, and move on to the next one. The great thing about real estate is that there is always another house for sale.