Real estate investments can be lucrative and exciting business ventures, particularly in today’s rapidly appreciating real estate market. A sound investment can yield long term rewards, and add a reliable revenue stream to your finances. But it comes with work, and careful consideration. Here are a few things to keep in mind if you’re looking into a real estate investment.
Know Your Market
Home and land prices are on the rise in many parts of the country, making any real estate investments potentially that much more profitable. Still, markets widely differ across the country, and even within sub-regions. Buying property in the rural Southwest, for instance, will be very different from the rural Midwest; likewise, prices and real estate between even Boston and New York will vary widely.
Consequently, it’s important to be thourough in knowing the place in which you’re investing. Know its advantages: are taxes and cost of living low? Are there public amenities, like parks or museums, nearby? Likewise, consider its drawbacks. Is there any significant industrial or other manufacturing work nearby? Is pollution an issue? A comprehensive assessment of a given region will help you hone in on the right place to make an investment.
Real estate investments often come with significant caveats. For instance, you might buy a property cheaply that requires extensive work. For this and other reasons, you’ll want to build a reliable network of contractors, plumbers, and electricians — as well as financial and legal professionals — to help you take on even the most challenging investment. That way, you’ll be ready to quickly get to work after any purchase, speeding up your timeframe and saving you money.
One of the trickiest parts of any successful real estate investment is finding a way to fund it. Banks or credit unions may be reluctant to lend money for a project that requires significant renovation, particularly if you don’t yet have a substantial track record of success. However, there are other options, like hard-money loans, that may work for you. While hard-money loans may carry higher interest rates, you may also be able to more quickly secure needed financing. Likewise, some banks may be willing to grant a construction loan, which often carry higher rates, but will give you fairly rapid access to capital needed to make renovations. You’ll want to consult with a financial professional to determine the best financing avenue for you.
Real estate investing is tricky, but with a sound plan, you may be able to achieve substantial financial success.