Four Questions to Ask Before Investing in Real Estate

refinanceInvesting in real estate is a smart way to make some extra money. When you buy homes and properties, you have the option of renting those properties and making some money every month or selling those homes for more than you originally paid. Making the right decisions is the best way to ensure that you buy properties that make you the greatest amount of money. Before looking at which cities have the best markets for buyers, there are a few simple questions that you need to ask yourself.

What is the Neighborhood Like?

Many new investors make the mistake of thinking that they simply need to buy low and sell high. This leads to them purchasing homes in less desirable areas. They quickly find that they cannot locate dependable tenants for those homes or that buyers aren’t interested in living in those neighborhoods. Taking the time to check out the neighborhood for yourself is a good tip. In addition to looking at the home and surrounding homes during the day, drive by after dark. This gives you a good idea as to whether tenants or buyers will feel safe and comfortable there.

Is the Home in Good Condition?

Sellers price homes based on current market conditions, comparable properties for sale and the condition of the house itself. If the price is so low that you find yourself rubbing your eyes in amazement, there might be something significantly wrong with the property. Pay for an inspection of the home. This lets you know if it needs a roof, if there are foundation troubles and if there are any infestations. You’ll also find out more about the structure of the house and learn what you will need to replace or repair after buying it.

What is the ROI?

Return on investment, also known as ROI, is a term that experts use when describing the amount of money that you’ll make back after making an investment. When buying a home, you want to think about how much that home will put back in your pocket. If you decide to rent out the property, think about how long you need to rent the home before you turn a profit. If you want to flip the home, you need to consider the price you pay to buy it and the cost of any renovations. Compare the money you put into the home to the amount that you can make.

Do You Have Financing?

Whether your an Investment guru like Rick Schaden or a regular Joe, you should always ask yourself about financing as well. Unless you have deep pockets, you probably need to obtain a mortgage. Can you afford to make those mortgage payments when the house sits empty before you find a tenant or if your tenant is late on the rent? With homes that you want to sell, you need to think about how long you can carry the mortgage until you find a buyer and close on the house.

With housing prices slowly rising across the country, now is a good time to make a few investments in the real estate market. Whether you flip homes or rent homes, you have the chance to make a significant amount of money, but before buying your first piece of property, ask yourself a few basic questions.

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About JW

Trader for 14 years. Series 7 & 63 licensed. Masters in Financial Management. Teacher of 100+ hours of financial education classes.

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