Why You Should Consider Investing in Real Estate

new-home-2095489_640Let’s face it – most of us are not going to become wealthy overnight, especially with the reality of student loans and the current job market. So when it comes to making money, creating several streams of income may just be your best bet. Investing in real estate is a great option and it doesn’t have to be an overwhelming process. In fact, we’ve comprised a list of benefits and points to consider when deciding if it’s right for you.

Rental Income

This one is listed first because it’s self-explanatory When you buy a property and open it to renters, you’re making a profit off of what you charge for rent, especially since most mortgages are fixed. Your mortgage doesn’t rise with inflation, however, the cost of living and subsequently rent do. Just keep in mind that you’re going to be required to pay taxes on the property itself, as well as the income.

Location Matters

When you decide to invest, put a lot of thought into the locale. Up and coming areas that are still becoming established are more likely to have cheaper properties that will enable you to buy low. Buying low means that the property has either been foreclosed on or is under market value, making it cheaper to purchase. The value of your property will steadily increase as an area becomes more populated and businesses begin to move in, making it a more desirable place to live. That’s where classic supply and demand comes in. Think about places you’ve visited yourself or have heard a lot about. There are areas around the country that have seen this happen including Boulder, Portland, and Austin. Smaller cities, such as Burlington, Vermont and Chattanooga, Tennessee are starting to see a similar trend, which means maybe it’s worth looking into Tennessee real estate for your next big investment. 

Know Your Budget

What’s your wallet look like? Decide how much you can afford to comfortably spend on investing and recognize that you’re typically going to need around 25% down in order to access a mortgage for buy to let. Also understand that although the returns can be lucrative, you are still taking a financial risk. You must be prepared to cover the costs if you are unable to fill the property with renters or unexpected damages occur after purchase. It can be a very expensive ordeal that could very well break the bank if you’re not completely informed or prepared before making the commitment.

Don’t forget the Appreciation

Properties appreciate and become more valuable (and lucrative!) as time goes on and inflation increases. If your property is in a desirable area for new homes and developers are interested in buying it up, you’re in luck. When your rental property appreciates, you then have the opportunity to sell it for a higher price than you bought it and either keep the money or reinvest it into more properties.

Consider the Work

Think about what you intend to do with your property. Are you a skilled carpenter or possess the capital to hire one to remodel? The kind of condition your property is in when you buy it is going to make a big difference when you’re ready to sell it. Decide whether your goal is to buy, flip, and sell, install or remodel a certain area of the home, or if you’re leaving the property as is. It can tack on a lot of extra and unexpected costs if the home needs a lot of work in order to be resold at a higher price.

Investing in real estate can be a big decision with great returns if you’re willing to do your research and invest wisely. Never be afraid to consult an expert if you get stuck and make sure you’re investing for the right reasons. Good luck!

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