We are in a very strange time at the moment which has left many struggling financially, which will have a huge impact on the stock markets, the economy on the whole and as a result, real estate. With this in mind then, there are many who have liquid capital or lending power, who are considering looking at real estate investment properties. If however you have never invested in real estate, and that is something which you are interested in doing, here are some tips to follow to ensure that you make the right decision when the time comes to buy.
Something which you may have heard is that real estate has always gone up in price, throughout history, real estate is always rising. Whilst this is true, and that even when the prices have fallen there has been an eventual rise, the time frame which we are talking about may not be conducive to your own financial goals. For example if you are looking at making money in the next 10 years, then there are certain markets which you are going to have to avoid, as they promise returns in perhaps 25 or 35 years. This is why it is critical to understand the market and how it has historically moved, prior to investing.
Always remember that real estate is very much about supply and demand and whilst the demand for housing has always outstripped the supply that there is, certain properties are more desirable than others. Investing in a 7 bedroom luxury house may see you spend many months without any inhabitants, and when it comes to sell that may also be very tricky, all of which will lose you money. Investing in a 3 bedroom family home with good schools and hospitals in the area on the other hand, will ensure that there is a queue of people looking to rent or buy it when the time comes.
There is a real romanticism to what is known as a doer upper, a home which is in desperate need of TLC, and which can be snapped up for a very low price. The thought of dropping $50k on a home, $25k in renovation work and selling the home for $110k is very tempting of course, but you have to know what you are doing. In order to get this right you’ll need good contacts in the construction industry, architects and designers who can turn that property into somewhere extremely desirable.
Always aim to minimize your level of exposure and budget in a way which means that you always have cash flow coming in. Some make the mistake of investing almost everything they have in the property, which of course is then going to be tied up for the foreseeable future. Having $150k in the bank means you should be looking for properties in the $100-$120k region, not looking to buy in at $145k.
Take your time, wait for the market to fall, and then jump in and get that money.