What to Look for When You Want to Invest in Real Estate

rmorrissDecember 16, 2021

580 3 minutes read

The image source is Pexels.

Real estate can be a great investment, but it’s important to do your homework before leaping into this market. If you know what to look for when you’re ready to buy property, you’ll have a much easier time dealing with all the hassles that come with closing a deal and settling into your new home or apartment building. Before you decide that you want to invest in real estate, take some time to consider all of the factors that might impact your investment and how they will affect your financial situation overall. Investing in real estate can be an incredible way to earn money and build wealth if you know what you’re getting into. Here are important questions to consider before you choose to invest in real estate:

1. Are you prepared to put money down?

Before you spend a dime on real estate, do some research and figure out how much money you’re prepared to invest—both upfront and beyond your mortgage payment. Not only will it help determine whether buying is financially feasible for you, but it will also help guide your decision-making process down the line. Ideally, you should aim for around 20% of your pre-tax income. If that seems like a huge chunk of change (and it likely is), then don’t panic: there are other ways to get into real estate investing without blowing your entire savings account on a single investment property.

2. Have you read real estate reviews?

A good place to start when you’re looking for a piece of property is to read online reviews of comparable properties. If there are similar properties nearby, how have buyers responded? What sort of shape are they in? What sort of returns have investors been able to see on their investments? Good real estate reviews like Kay Properties reviews will tell you all these things and more so you can make a better-informed decision about which investment might be right for you.

3. Do you have enough cash flow coming in from other investments?

Before you look at real estate, make sure you’re getting all of your money’s worth on your other investments. If you’re not, it’s time to reevaluate them—and that’s a good idea whether or not you plan on using them as a source of the down payment for your next real estate deal. For example, if stocks are underperforming bonds, it might be time to switch some assets around. Likewise, if bonds aren’t paying well enough for their risks, consider investing in treasury notes instead. This way, as long as you have sufficient cash flow coming from your other investments, you can be sure your down payment will come from those assets as well rather than from one-time loan financing.

4. Is there potential for appreciation?

One of the biggest concerns when investing in real estate is its resale value. If you’re not sure if a property will appreciate, find someone who has some experience and can give you his or her opinion on it. An agent might be able to look at comparable sales and help you figure out what kind of return that location might bring. Keep your eyes open for appreciation opportunities as fixer-uppers in good locations are easier for investors to flip than more valuable properties with troubled pasts. For example, an unassuming house next door to a multi-million dollar property could go for far less than it’s worth but still bring you an enormous profit when sold within a few years due to its location.

5. Have you done your research on the area you want to invest in real estate?

If you’re going to be investing in a property, you have to know how it will perform by doing your research. To determine if an area is going to grow or decline, spend some time driving around and note what areas seem more successful than others. Look for active businesses, friendly neighbors, and a positive atmosphere. Also, take a look at comparable sales prices from the past 12 months—are they increasing or decreasing? As long as an area is growing positively with potential for more growth, you’re likely making a wise investment. If there are clear signs of decline—such as lots of vacant homes on sale for less than market value—you may want to consider another location. You should look into this before you invest in real estate.