Having a real estate property as an investment can be a great thing, but if you’re hoping everything goes smoothly, you’ll need to make sure that you’re well-prepared. This is a decision for the long-term that can impact you for better or worse, and sometimes both, depending on how well you’ve planned for it. Forbes.com reports that some of the best cities to start looking at investment properties include Orlando, Raleigh, Jacksonville, and Charlotte, as these are the places where the cost of living isn’t skyrocketing like it is in cities like Seattle, San Francisco or Miami.
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If you’re considering dipping your toes into the real estate investment world, here are some things to think about and to help you evaluate if it’s the right investment strategy for you.
Paying with Cash is Best
Before you buy your first investment property, make sure you have plenty of extra cash stashed away before doing so. Many experts advise against taking a loan to purchase an investment due to the many potentially unforeseen events that can happen along the way. If you really want to buy a home and rent it to someone, the best way to do it is to pay with cash. While the economy, housing market, and renters can change, at least you won’t be putting yourself in a hole that you can’t get out of. And if it turns out that investing in real estate is just not the right fit for you, you’ll be able to sell the property and walk away from it much easier and with less of a negative financial impact.
Plan Out All Your Expenses
Whether you’re looking at buying investment properties such as Nashville townhouses, San Diego homes, Houston condos, or something else, you need to consider all of the costs that will come along your way. Putting money aside for upkeep, taxes, utilities, and repairs can seem daunting, but looking into a property management company to help out can be well-worth the cost. Regardless of whether you use a third party or manage the property yourself, you need to consider what it will cost after the home is yours and you’re ready to start leasing it out.
Start Small
Some investors like to start small with their real estate investments by purchasing a duplex or a larger house with a basement apartment and leasing that out to someone else. This can be uncomfortable as you’d have to live on the same property as your tenant, but at least there won’t be as much risk involved. Doing things this way can give you a better feel to determine whether investing in real estate is the right thing for you before jumping off the deep end and spending what’s likely to be a large sum of money. If all goes well, you could always get a property that has the opportunity for more income. You should also evaluate your budget to make sure that you would still be able to live a stress-free life without a rental income every month, just in case no one moves in right away.