It’s been said that 90% of millionaires earn their money by investing in real estate. But don’t be fooled! Though building wealth with real estate is 100% possible, it’s never guaranteed.
You have to know what you’re doing, approach the task with a well-constructed strategy, and make sensible decisions at every turn. Fail in this regard and your hopes of getting rich with real estate can end in disaster. New to this world and want some professional help deciding if it’s the right path for you?
Well, this blog post should prove useful! Today we’re looking at 5 essential considerations for anybody thinking about investing in real estate. Check them out.
1. Location
The most important consideration for buying any investment property is its location. It impacts everything from how easy it is to find tenants and the rental income you can charge to the rate of appreciation you enjoy.
That’s why you should never rush to buy the first budget house you find! If it’s far from amenities, devoid of green spaces, surrounded by crime, and nowhere near schools, transport hubs, and so on, then you’re in for a rough ride. Spending a little extra on a better location is often a more sensible way to proceed.
Oh, and be sure to think about the future too. Just because a location’s nice now doesn’t mean it’ll stay that way! By the same token, a run-down neighbourhood could transform into something altogether more sought-after and lead to a giant windfall as a result.
2. Down Payment Savings
A lot gets said about the power of leverage when it comes to real estate investing. And it’s true: borrowing money from the bank is a fantastic way to build wealth faster in this industry. But you still need a stockpile of cash to get started!
The exact amount of money required for a down-payment varies, yet 20% is typical. That means you’d need $20,000 saved up to purchase a $200,000 property. Throw in the cost of renovations and maintenance and it pays to have additional capital set aside.
So start saving! Get a second job, sell your stuff, and move back in with your parents for a while. Scrimp and scrounge wherever possible and you’ll soon have enough to begin your foray into real estate.
3. The Specific Type of Investing
Not all real estate investing’s made equal. There are actually a wide array of ways to do it and properties to choose between! Some people flip houses, many buy to let, a few purchase commercial properties, and so on; the list of possibilities can feel endless and each one has its own pros, cons, and level of risk to figure out.
It’s up to you to decide which type of real estate investing you want to embark on. In recent years, real estate courses have become a mainstay for investors looking to learn the market from a realtors perspective. However, your personal risk-tolerance, amount of start-up capital, and specific interests should all inform the choice. We recommend doing further research into the different options, making sure you understand the implications of each choice and proceeding from there.
If it all feels like a mystery, then seeking professional wealth strategy support could be a sensible step. Sites like https://wealthability.com/wealth-strategy/ can help you figure out the best way forward when it comes to building wealth with real estate and beyond.
4. Your Credit Score
Unless you’re buying a property in cash, you’ll need to arrange a mortgage beforehand. And that’s where your credit rating comes into the mix! Lenders will base their decisions on this score, making it imperative that yours is in good standing.
A few points difference might not sound like much. The impact it can have on interest rates you’re offered could cost you thousands of dollars over the lifetime of the loan though. Needless to say, that’s less than ideal when you’re trying to build wealth from the ground up.
Improve your credit score can take time and effort. However, you’ll end up with a more attractive mortgage offer that’ll more than justify the hard work.
Start by accessing a free credit report to see where you stand. With any luck, you’ll already be in a great position. Yet there may also be mistakes you need to correct (a simple call should do the trick) and room for improvement to boot.
5. The Importance of Cash Flow
Positive cash flow is when you have money left over after expenses. Negative cash flow’s the opposite: you spend more than you earn. It almost goes without saying, but positive cash flow’s the one you want when you’re running a business!
Alas, first-time real estate investors often fail to take cash flow into account in the first place. They focus too much on possible appreciation, which leaves them vulnerable in times of market volatility. If the housing market starts to slide, for instance, then their investment loses money and their hopes of selling for a profit disintegrate.
By comparison, investors who consider cash flow (and ensure it stays positive) win regardless of market downturns. They continue to generate more money (from rental payments) than they spend on the mortgage and maintenance etc, which a) takes the pressure off and b) gives them options. The lesson’s simple:
Never gamble on the promise of appreciation at the expense of cash-flow considerations.
Remember These Considerations for Building Wealth With Real Estate
Investing in real estate is an amazing opportunity to generate wealth. Contrary to what some people would have you think, though, it’s definitely no walk in the park! Success in this industry takes careful planning and expert-levels of insight.
The considerations in this article should help anybody who’s thinking about entering the wonderful world of real estate investing. In reality, though, we’ve only scratched the surface on what it takes to see success in the industry! To continue your education and better your chances of building wealth with real estate, search ‘property’ on the website now.
