Five Dos and Don’ts of Real Estate Investing for Beginners

Owning at least one house or property should be a priority. Aside from living security, a house is a stable investment because it allows you to generate wealth through appreciation and build equity. It also lets you earn a passive income from rental properties and provides you with an option to sell when the market is high.

Before investing in real estate, however, you have to consider both the financial and non-financial factors involved. You have to carefully calculate the risks and opportunities before taking the plunge.

Here are five dos and don’ts before you start looking into buying a property:

Do: Set a Budget and Stick to It

If you’re planning to invest in real estate, it’s important to have a clear idea of your current income (cash flow), your expenses, and your outstanding loans. Track your income and expenses, and factor in other items in your calculations. Once you’ve a set a clear budget, stick to it.

Don’t: Forget to Set Your Goals

Think about what you really want to achieve. Never rely on anyone else to do it. You need to have a clear idea of your budget and the risks you are willing to take. Set the rate of return you want to achieve and the ways on how to achieve it. List them down for future reference.

Do: Rely on Your Common Sense

Purchasing decision when buying a house involves 90% emotion and only 10% logic. This shouldn’t be the case. You need to allot a lot of time to research before you seal the deal. Many investors lost their money on real estate because they hadn’t set significant amounts of time before they bought the property.

Don’t: Make Hasty Decisions

You need to be wary of deals that seem too good to be true. If it were such an amazing investment, why would the property still be available on the market? Examine everything from top to bottom, and look out for important details that you might have missed. Sometimes, the best and reliable deals are the boring ones, not the perfect and promising ones.

Do: Research the Potential Neighborhood

Besides looking into housing prices and taxes when buying an estate, you also need to consider simple matters such as finding a neighborhood that suits your lifestyle. You can check out websites that provide details on the quality of life that you can expect in a neighborhood. These sites show the demographic data of residents, information on racial diversity, the number of restaurants within walking distance, information on transit routes, or a decent overview of schools in the neighborhood. You may also visit the property yourself. Better yet, you may consider visiting the property yourself.

Don’t: Buy a Property Without Inspecting It

Do your homework diligently. What better way to do it than by inspecting the property personally. While the Internet can be trusted when it comes to researching about an area, nothing beats the perspective you get when you check out the property yourself. Your gut feeling should tell you if the property is fit for you and your family.

Do: Remember That Good Management Is Key

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One great thing about investing in real estate is that it allows you to earn passive income from rental properties. But it’s not simply renting out your property and receiving payments per month. Managing a rental property requires ample time, proper organization, social skills, and keen attention to details. You also need to keep track of the monthly overhead expenses such as community fees, maintenance fees, insurance, property tax, property management, repairs, and income tax.

Don’t: Forget to Take Care of Your Tenants

Finding good tenants who pay the rent on time and not damage your investment property is key to ensuring that you have a steady income. Rent out to professionals with full-time jobs and a good credit history. Maintain a mutually respectful relationship with them. Listen to their comments and feedback, and make sure that you act promptly on their request. Also, avoid discrimination based on their race, nationality, or gender.

Do: Be on Top of Everything

The rule of thumb in keeping your real estate investment afloat is underestimating your income and overestimating your expenses. You need to be aware of all the out-of-pocket expenses involved. Running your finances may be difficult at the beginning. It’s best to consult an accountant who knows about real estate investment so that you’ll know what you’re getting into.

Don’t: Hesitate to Invest Once a Great Deal Arrives

Now that you have knowledge about real estate investment, the next big step is to take the plunge. You may feel hesitant, at first, but it’s normal. It’s just a phase. All you need to do is to go over your list and make sure that you’ve covered all important angles.

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