Many of us strive to be financially free, or at least comfortable enough that we’re able to do the things we love. Unfortunately, it’s unlikely that you’ll become financially independent by just working a job and saving. As a result, people are learning about other ways to secure their financial futures.
One way to boost your financial security is by investing — specifically, investing in real estate. More and more people are attracted to real estate investments because it’s a safe long-term investment that can result in some serious cash flow.
However, investing in real estate can be highly volatile. It can end up being the worst investment you’ve ever made if you don’t think about the decision in detail. Luckily, this article is here to help you look at some key factors that will help you make an informed decision on moving forward in real estate investing. Here are four things to consider before making the leap:
Are You Prepared Mentally for the Journey?
The effects of a bad real estate investment on your finances can be devastating, but the effects on your mental and emotional health can be even more detrimental. With this in mind, one of the first considerations you want to make is if you’re mentally prepared for the journey.
Are you going into this investment with a positive but realistic outlook? Are you emotionally prepared for the ups and downs? and, Are you committed to a long-term investment journey? Answers to questions like these will help you determine whether you’re mentally, emotionally, and spiritually ready for all that this investment opportunity brings.
Do You Have Enough Knowledge?
Investing in a property is as simple as looking for the perfect home, buying it, and choosing how you want to make an income off it, right? Definitely not. There are many layers to real estate investing, and, honestly, you should be familiar with all of them if you want the best chance at success.
At the very least, you should be comfortable with the basics of real estate investing. This includes the financial obligation, risks, advantages, income sources, ways to invest, where to look for properties, time commitment, state of the market, and how to continue expanding your knowledge about real estate. Ultimately, the more knowledgeable you are about real estate investing, the better.
Can You Be a Responsible Borrower?
Although it’d be wonderful to pay for your investment with cash, most people who decide to invest in real estate can’t do that. Instead, borrowing from a bank or other financial institution is the most common way to fund buying a property. So, if you plan on going this route, you must ensure your financial situation will allow it.
Even if you don’t go the traditional bank route to back your real estate investment, there are many different lending options to choose from. One example is investing in a real estate investment trust with a self-directed IRA.
A real estate investment trust or REIT is “A company that owns or finances real estate. A REIT will invest in rental properties (known as equity REITs), or finance the mortgages (known as mREITs), or both.” You can open a self-directed IRA and use the funds you contribute to this account to invest in a REIT. This option not only offers the financial support you need but alleviates some of the work as REIT’s buy, manage, and finance profitable real estate investments for you.
Whatever lending option you decide on, ensure you’ve done adequate research and understand how it will affect your financials now and in the long run. Also, it’s a good idea to enlist the help of legal counsel or a financial advisor to ensure you’re clear on the risks and obligations associated with the lending option you choose.
Is It the Right Time?
It’s absolutely an excellent time to invest in real estate in general. Interest rates are low, it’s easier to qualify for a loan, and there are new tax breaks in play for buyers. Still, you must consider whether it’s the right time in your life to make this investment. Not only do you want to consider if it’s the right time for you, but also if it’s the right time for your loved ones.
Ultimately, even if everything seems in alignment for you, the people around you may have some concerns about investing in real estate. It’s best to consider them and do your best to develop a plan that works for everyone.
Moving Forward with Real Estate Investing
Whether you leap into real estate investing is highly dependent on your individual circumstances. However, if you do decide to move forward with real estate investing, here are some things to do to help you get started:
- Use the internet to learn all you can about real estate investing.
- Lean into your network on social media.
- Keep up with trends in the market.
- Follow experts in this sector for additional resources.
- Attend real estate investing conferences and workshops.
- Enroll in classes that teach you about investing.
- Immerse yourself in organizations dedicated to real estate investing.
- Get a mentor.
Ultimately, investing in real estate is a long-term commitment. Ensure you’re prepared by considering the questions above and that you’re moving forward with intention and focus.