One of the hottest investing strategies in recent years has been real estate. Many people are capitalizing on affordable real estate prices and building up a great savings for their retirement. However, investing in real estate does require some risk and it’s important to do your research before you decide to pursue this investment strategy. Read on to learn some of the critical tips for successful real estate investments.
Save Up Some Extra Cash First
Investing in real estate can be a great way to supplement your retirement income, but it’s important to make sure you have a foundation for your retirement first. This will ensure that any losses from your real estate investments won’t leave you completely out in the cold in the future. It also helps to provide a little safety net for the unforeseen expenses that are inevitably going to come up when you’re dealing with properties. For the best results, have a separate reserve of cash available just for these purposes, whether it’s repairing the roof or paying condo association fees.
Buy Real Estate Locally
There are three benefits to making your investments in real estate close to home. These benefits are:
- There’s no area you’re better familiar with then your own city – or better yet, your own neighborhood. This makes you better equipped to evaluate a property’s true worth, both in the purchase price and the price you set if you choose to rent it.
- It’s critical to see a property in person and evaluate the surrounding area before buying. It’s not sufficient to have an inspection performed remotely – you need to be sure it’s in a nice enough neighborhood and that the home is really in the condition it’s advertised as.
- You can keep a close eye on a property that’s close to home. This is especially important if you rent out a property throughout the year. Being close to your real estate investments helps to make sure they stay in good shape and that your investments are being well cared for.
Evaluate Your Goals
There are different approaches to investing in real estate and you need to clarify your goals before you get into the game. Do you want to rent out a property and get a steady income over many years? Or would you rather sell homes relatively soon after buying to make a profit? Make sure you have a clear goal in mind as far as your investment goes and have a plan of action in place to achieve those goals successfully.
In addition to financial goals, you also need to make decisions about how you plan to handle your properties in more practical terms. Do you plan to manage the properties yourself? Can you handle the necessary repairs and maintenance or will you hire professionals to do the job? Figure this out before you buy to ensure a smooth transition once the property becomes yours.
Diversify Your Investments
One of the most important principles of successful investing is diversification. You don’t want to put too many of your eggs in one basket, especially when it comes to real estate. According to Business Week, no more than a third of your retirement assets should be placed in real estate. This helps to prevent any huge losses if the market becomes stagnant. It also provides a little cushion for the fact that real estate is illiquid (meaning that it’s expensive and difficult to buy and sell).
Know Where To Find Deals
The key to really making a profit on your investments is to get a great deal on a home. With today’s market rates, you can often get a good deal just by looking in certain neighborhoods or at certain times of the year. However, there are thousands of foreclosures available these days being sold at prices well below market value. It takes time to find these deals, however, so make sure you look into foreclosure listing services to help you get the information you need quickly and efficiently.
Set Limits For Spending
It’s easy to get carried away when you are really set on getting a certain home or if you’re just anxious to get into real estate investing. One example is foreclosure purchases. Because foreclosures are so widespread at this time, it’s becoming a more competitive area for real estate investors. Some investors believe that a foreclosure is a great deal no matter what the price and they get caught up in a bidding war for a property. Before you decide to put in an offer for a home, decide what your upper limit is as a purchase price. Stick to your guns and don’t exceed that limit to avoid overspending in the heat of the moment.
Investing in real estate can be very profitable and a great way to earn some extra money with little extra work. However, you really need to do your research and understand what you’re getting yourself into before you start. Speak with a financial advisor to learn more about the risks of real estate investing and to find out if it’s a smart choice for you.