written by Judit Daniel, CEO of SIMP
While the location is not an unimportant consideration, some would-be real estate investors become so fixated on selecting the ‘right’ area for an investment property that they get stuck on that point. Their uncertainty prohibits them from addressing other important considerations and impedes progress toward their goal of building wealth.
Ignoring other important factors can lead to an unsuccessful investment experience. Doing research upfront is crucial to creating the ideal investment property ownership scenario for each investor, based on their individual situation, needs, and comfort level
Here are five important questions to ask when preparing to invest.
Am I financially ready to invest in real estate?
Real estate investments can be more costly than expected at first. The home you buy may need repairs, which cost money. If it takes longer to get a tenant in place than you planned, you will have expenses to carry without income being produced.
Am I prepared for the responsibilities of investment property ownership?
Are you ready to be ‘on-call’ 24/7 to resolve issues that arise with your rental house? A property management company local to the location of your rental can be counted on to handle maintenance issues that arise, taking much of the stress out of being a landlord.
Who will I rent to?
Who will live in your investment property? Do you see yourself renting to families or some other demographic? Creating a future tenant profile and knowing as much as possible about the kind of tenant you want to attract will keep you focused as you filter through investment property options. The characteristics of a home, from the number of bedrooms and bathrooms to whether it has street parking or a garage and a yard, are very different for each category of potential renters.
Did someone mention location?
Who hasn’t heard the old real estate axiom location, location, location? Along with other considerations, location is a factor in choosing the right real estate investment. An affordable house with charm and character is not a good investment if the neighborhood is undesirable for your future tenant. When mulling over a property, put yourself in your ideal tenant’s shoes. Does it have the amenities important to that renter? These factors influence whether you will be able to rent the home quickly for a profit.
How much will it cost to make the property market-ready?
One tried and true rule of thumb about home repair and renovation is that it always costs more than expected. Enter real estate investment with your eyes wide open. If the property you want to buy is not move-in ready, make sure you have the funds to get it in shape quickly and to pay the mortgage and other expenses until a tenant moves in.
Do be a ‘herd’
Many beginner investors just follow their friends and buy in the wrong location ONLY because a friend bought there some years back. Instead of making the right decision they are making the comfortable decision not realizing it may not be in their best financial interest.
While the location is an important factor there are other factors that need to be incorporated, some are based on their investor’s profile and have nothing to do with a specific property.