Buying investment properties, is it right for you?
Many people are turning to investment properties to build wealth, and for good reason. If done correctly, people who invest in real estate can make a bundle from their properties.
But before you rush out and start buying up homes to rent or sell, you must first ask yourself if buying investment properties is right for you. Investing in real estate takes a great deal of knowledge and if not entered into carefully, can end up costing you instead of making you money. Consider the following before investing in properties:
Do I know enough about real estate?
People often say that real estate investing is a multi-disciplinary skill that requires extensive knowledge in a number of areas, including:
real estate law in your state or the state your properties are in
federal income tax law
property management
real estate finance
real estate leasing
real estate sales
real estate appraisal
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Just like any other business, real estate investing requires a great deal of knowledge, so make sure you have done your homework and know what you're getting into before you begin investing in properties. It's a good idea to talk to people who already invest in real estate or agents and get advice and tips from them.
At the same time, steer clear of infomercials and books from real estate "gurus" who claim that their books or courses will make you millions. Investing requires extensive research in a number of areas, and a book or two or a set of CDs is not going to teach you what you need to know.
Do I know how to manage a property?
Many people purchase investment properties with the purpose of renting them out to tenants. However, there are many things to consider before renting out your properties, including:
Proper screening and credit checks. You could end up with the tenants from hell if you don't conduct credit checks or screen your potential tenants before having them sign a lease. Do credit checks (which are only about $10) on each tenant and ask them for references from previous landlords or complexes they've lived in. In addition, evictions can be expensive - up to $3,000 in some states - so make sure you're comfortable with the people you're renting to to avoid costly evictions.
Consider upkeep costs. Unless your lease states otherwise, as a landlord you'll be responsible for the upkeep of the property, including repair costs, plumbing, or other similar issues.
Learn landlord-tenant laws. This is vital if you plan on renting out your properties. Consider joining a landlord association, and in the very least become educated in tenant laws. Know the proper forms to have, and consult an attorney before drafting a lease agreement.
Am I financially capable?
People often say, "It takes money to make money," and real estate investing is no exception. Make sure your credit is good and you have enough income and equity to invest in properties. Talk with a mortgage loan officer if you have any questions about your eligibility.
Investing in real estate properties can be your ticket to wealth and financial security, but like any other business, it takes a great deal of knowledge. In order to determine whether buying investment properties is right for you, be sure to educate yourself.
