Things to Consider Before Investing

by ETF Base on June 24, 2013

While the housing market has been very volatile over the past five years, many people have been able to navigate through the housing crisis and have continued to turn impressive profits by investing in under-valued real estate. If you are interested in real estate and are looking to make some extra money, you also could turn a profit by investing in real estate. While it can be a great way to make some extra money, there are several things that you should consider before investing in any new real estate investment.  A finance degree can always help with these concepts too.

As you are looking to invest in real estate, the first thing that you should consider is how you will pay for the investment property. While there are many great mortgage products available for primary residences, which allow people to buy a home for as little as three percent down, purchasing a real estate investment property can be more difficult. Most investment property mortgages will require you to go through a harder application and underwriting process and will require you to put down twenty five percent or more. If you do not have the cash available to make the down payment, you will either need to save until you do or find another source for the equity contribution.

Once you are able to afford to purchase the real estate property, the next factor to consider prior to purchase any new property would be the market conditions. Regardless of whether you are buying the home to flip or to hold as a rental, you will need to consider market comparables. If you are looking to purchase the home to hold as a rental, you should research what asking rents are for comparable properties and try to determine what the current vacancy rate is the area is. If you are looking to purchase the home to flip, be sure to understand what other homes in the area are selling for and how long they typically sit on the market before selling. Based on this information, you will be able to conclude whether that property is a viable investment.

If you have found a great property that needs to be repaired or improved before it can be rented out or sold, you also need to consider how you are going to pay for and complete the repairs. In all likelihood, you will not be able to get a loan to make the necessary repairs. Therefore, you will need to either use a credit line or cash to make the necessary improvements. Furthermore, you will need to find a contractor that you trust to provide you with a budget, complete the repairs correctly, and stay within the agreed upon budget.

Most importantly, when you are looking to purchase a real estate investment property, you need to ensure that you are well protected and fully insured against weather damage, vandalism, fire, and a variety of other calamities. To learn more about homeowners insurance and to receive quotes from various insurance companies, be sure to visit

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