If you are planning to invest in residential or commercial property for the first time, you need to think this through. Whether you are buying for personal use or for rental purposes, you should look for real estate that is expected to appreciate over time. Many people have managed to become very rich by joining the real estate business, and you could be one of them if you play your cards right. Here are seven things to consider if you want your investment to be safe and profitable:
1. Statistics of the Real Estate Market
It is wise to observe and understand the overall state of the real estate market before putting down your money. The rule of thumb is buy during recession and sell during inflation. Do not buy at a time when property prices are hiked because that would ultimately result in a loss if you hope to resell it later. When the market is down, the property will go for lower than its actual value, which is a benefit for buyers, but disadvantageous for sellers.
2. Down Payment and Installment Plan
The down payment and installment plan of acquiring a property will impact your life for many years to come, so beware. You are probably betting your entire life’s savings and future income on this investment, thus you need to realize a reasonable budget. Do you have enough money to make 20% or more as down payment? Do you earn enough to afford the mortgage installments and basic living expenses in the long run?
3. Credit Score
If you have a great deal of debt in your name, thinking about a real estate investment is a bad idea. If your credit score is above 700, you are good to go; otherwise, you should wait and work on improving your score first. You can improve your credit score quickly by paying off debt and minimizing credit usage. If you mortgage a property while your credit score is low, you will end up paying an unreasonably high interest rate on the loan and accumulate even more debt.
4. Maintenance/Renovation and Insurance Costs
Real estate is not a one-time investment; it needs maintenance to stay in good form. If you buy an old building, you may have to spend a hefty sum on repairing and updating it; a new house will also need work after a 10-year period, or even sooner in some cases. Insuring your property is important, as it will protect you from many unforeseen costs and legal liabilities in the future. If you possess sufficient funds to cover all that, it’s a green signal. If you are purchasing property for rental purposes, make sure that its upkeep does not produce a negative ROI (return of investment).
If you have ever indulged in realtor advertising, you may have noticed how much they emphasize on the location; although, everything is overly exaggerated. A good location would be a neighborhood that is thriving or has the potential to thrive. The proximity to commercial zones, employment opportunities, recreational facilities, and good schools is a good place to start. A bad location could be a place that has a high crime rate, limited traffic for local business, closeness to noisy industrial area, and constant electricity problems. It is hard to find tenants for real estate situated in under-developed and scarcely populated regions.
6. Seller’s Credibility
What do you know about the person you are buying from? Is he/she a credible real estate agent on the market or a direct owner who has earned a respectful reputation in the area? It is important to run background checks on every person involved in the deal.
7. Transactional Transparency
The transaction needs to be completed in a legal and sound manner, so that there is no room for fraudulent activity. All the paperwork should be thoroughly assessed to clear any misconceptions or suspicions. Real Estate Attorney in San Antonio, TX, has the resources to protect your interests at all times. Having them by your side will lead to worthwhile investment in real estate.