Real estate investment has been in existence for decades now. It is a lucrative business if you know how to do it right. If you are a first-timer, you may be overwhelmed by the process, but you will catch up with time. Whether you want to buy rentals or vocational houses, you need knowledge of property investment.
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Things to consider before Investing in Real Estate
Anticipated Return on Investment
You need to calculate the expected returns before purchasing an investment property. Check how long it will take before getting profits and determine if the venture is worth risking.
Does the area have basic amenities like roads, electricity, and security, among others? Undeveloped areas tend to cost less, but you’ll take a long time before getting clients. Look for places that people like, and purchase the property. Consider Calgary House Finder to get your dream home near the best amenities.
Source of Stable Income
Real estate investment is a financial venture which may cost more than you anticipated. So, it’s best to be financially stable to push you through the period between purchase and sale of the property. Selling may take months, so you’ll need cash to survive. If you have another source of income, you can venture into real estate without worry.
Will you manage the property, or will you hire a project management company? If you decide to work alone, you will interact with renters and tackle all disputes. You will also look for new tenants through marketing. On the other hand, if you hire a management company, they’ll hire photographers and real estate image editing experts, add listings to popular marketing portals, deal with the tenants directly, market the houses, handle disputes, and other tasks at a fee. Weigh both options and see what works for you.
Type of Property
You can go for residential, commercial, industrial, or retail real estate. Do your research and determine which investment will give you better returns. In most cases, residential real estate is more profitable because people will always look for homes.
The 1% Rule
Investors use this rule when calculating the expected return on investment. The law dictates that you should not bring less than 1% of the property cost and other charges such as renovations. However, the rule has caveats, too, and you might end up shrinking it and working with the available options.
Whether it’s your savings, loans from lending institutions, or funds from family, what you have will determine the kind of property you can afford. It’s best to estimate the cost of repairs or renovations and buying price.
Understand the Risks
All businesses have risks and real estate has its share too. The common problems are; you may get lower interest, the cost of repairs, and taxes may go up therefore you should you sell your rental property at a loss. The economy can change, which may affect the local market, or bad tenants may occupy your rentals, and you incur eviction costs.
Learn the demographics of real estate investment, and sell your property when the market is good and purchase when the market price is low. Real estate requires patience, and in the end, you will reap a considerable amount.
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