7 Things to Know Before Investing in Real Estate

Real estate; has since eons been identified as a highly reliable asset and a lucrative source. Investing in real estate allows diversification of assets, instantaneous dual income, saves income tax, and offers a great inflation hedge thereby providing leverage. Considering these and numerous other benefits that come with investing in real estate; around 63% of the population is already investing in real estate according to the Census Bureau.

If you are here; you might be entering the real estate investor segment as well or might already belong to one. You might be a novice or an experienced investor but there are a few things you need to know before you begin investing in real estate.

Here we have shortlisted 7 eminent things you need to know. Read on!

1. Educate Yourself and conduct thorough research

Entering the real estate market without some homework is definitely not recommended. When you research rigorously and educate yourself, you will be able to identify trends, return on investment, and so on. Knowledge is what will pave the way for successful investing. When equipped with the knowledge, you can refine your investment strategies and focus on booming areas only.

2. Set Investment Goals beforehand

When you set goals, you strive and work harder to achieve them. Setting up goals can organize the investing procedure for you by determining priority tasks. The goals will help you come up with guidelines that you can follow when investing. Goal setting facilitates the formulation of plans like the number of properties to acquire, parameters for the rate of return, type or location of the property, and so on. Though all this might sound generic and something that can just be remembered; documentation is always a good idea.

When setting up goals, you can calculate expenses and profits expected as well. This will help you to plan better as you’ll have a clearer idea of how lucrative a property truly will be.

3. Secure down Payment

The realty market today is highly competitive. There is high demand and low supply of properties which puts sellers in a superior position. Today an interested buyer doesn’t really suffice. You need to possess characteristics that make you stand out as a buyer.  One of the ways to do this is to secure a significant amount of down payment. A minimum 20% down payment is expected from genuine buyers and you can always chip in for more. The down payment amount will also vary depending on the location, availability, and demand for the property.

4. Choose the Location wisely

Do not be hasty when investing in property. You might not move into the invested house but remember you’re putting in quite a lot of money into investing. Therefore; choose the location wisely. Consider aspects like amenities, job opportunities nearby projected appreciation of property in that location, crime rate, transit facility, rental demand, and so on. Conduct extensive research and also get a real estate agent or real estate agency as your ally as you hunt for a property. Since the realtors are well-versed in the process of home buying; once you put forth your requirements, they can help you find the best alternative that fits your needs.

5. Consider diversifying across Markets

What would you do in a scenario where you have extensively invested at one single location and the market declines due to some reason like an increased unemployment rate, increased taxes, or reduced capital spending on the infrastructural projects?

To avoid such financial risks, diversify across markets. Get invested in promising properties at different geographical locations. Every housing market moves independently so it’s a good idea to spread your assets across different economic centers. If one falls, others will still remain lucrative.

6. Clear off your Debts and keep a good Credit Score

Like most of the population, when investing you might consider getting a loan; approval of which can be quite tricky. The easiest way to secure a loan is to have an exceptional credit score! Steer clear of all your balances and dues, maintain records of your finances and rest assured your loan availing process will go smoothly.

7. Don’t let your emotions take the Driver’s seat

When buying a house, most people are driven by their emotions. They get very choosy and follow their heart rather than thinking practically about how the investment can be the most fruitful. They go for houses that are aesthetic rather than houses that are remunerative. This is all well and good if your plan is to reside at the property. However, if you are buying a house for the sake of profit-making, it is wiser to let your emotions subside and think logically. Put in your best effort to negotiate, take the help of your real estate agent and seal the deal as low as you can; this will ensure you generate greater profits.

Investing in real estate is quite a complicated ordeal. There are numerous parameters that need to be taken into account. Further, there are chances of committing grave errors. But with the right real estate broker by your side, you have it all under control!

Happy investing!