You can make profit with real estate investing, but before any purchase is made, there are things to consider. Investing is a serious business that can lead to great success or cause major financial failure. Therefore, it is to your benefit to learn the fundamentals so you always make good choices.
Critical Factors of Real Estate Investing
-Personal Finances – Real estate investing is not for everyone, but if your personal finances are in order, including money in the bank, steady income, and better-than-average credit, you may be in a position to invest in real estate. Generating cashflow in real estate can take hard work and time, so having your personal finances in order is critical.
–Good Planning – A major reason that investors fail is a lack of planning. With appropriate planning, you will understand the market you are most interested in, the process of securing loans, who to go to for needed repairs and upgrades, proper marketing/advertising strategies, and more.
–Property Choice – You need to determine the market segment you are interested in (residential, commercial, retail, or industrial), as well as the type of property that will be purchased. You can use the property for long-term rental income or rehab it for a quick sale and nice profit.
–Investment Expenses – There will be different expenses incurred when buying a property. For real estate investing, you must be prepared for everything, including the mortgage loan, utilities, legal fees, scheduled maintenance, capital improvements, and more. A good rule to follow is that over time, on average the expenses of a property will equal 50 percent of the income.
–Vacancy Rates – For real estate investing, the vacancy rate is also important. The last thing you want to do is purchase a piece of property anticipating a long-term tenant or quick sale, only to be left with a vacant building that yields no income or profit. As stated, with real estate investing, it is important to have a healthy bank account and steady income so expenses during periods of non-vacancy can be covered.