Peace of mind is undeniably important when making large investments – and few investments are larger than real estate. While there’s no magic wand solution for every conceivable risk associated with real estate investing, there are a number of ways you can minimize your chances of making an unwise investment. Just as you stand to profit from real estate investing, so too do you stand to lose quite a bit of capital. So, in the interest of avoiding financial strain and buyer’s remorse, take the following pointers to heart.
Look for Properties That Are Likely to Grow in Value
Purchasing a property that’s likely to grow in value can provide even the most cautious investor with peace of mind. Even if you intend to hang on to a property for a while or use it to generate rental income, knowing that it can be sold for a handsome profit at any time can be a tremendous comfort – especially to anyone asking themselves, “Is real estate a liquid investment?” So, before committing to purchase an investment property, take some time to determine how likely it is to grow in value.
The best way to go about this is location research. In fact, in many respects, an investment property’s location is more important than the actual property. For example, a spacious property that’s brimming with modern amenities is liable to generate weaker returns than a comparatively compact property with minimal amenities – provided, of course, the former is located in an area with waning demand and the latter is located in an area with abundant demand.
When carrying out location research, you’ll need to pay special attention to population size, population growth, local economy, median income, rental rates, and property values. This will tell you a lot about how much demand for housing exists within a certain locale – and how much residents are willing to pay for it.
Work with a Certified Home Inspector
You should never throw your capital behind an investment property that hasn’t undergone a professional inspection. No matter how bereft of flaws a property appears to be, there could be a host of problems lurking beneath the surface. To help prevent yourself from being hit with unpleasant surprises long after a sale has been finalized, enlist the services of a certified home inspector.
For starters, you may not be able to purchase the best home insurance for a property in the absence of a proper inspection. Secondly, without a thorough inspection from a certified professional, you won’t be able to make a truly informed purchasing decision. No matter how keen an eye you have for property issues, certified inspectors are trained to locate problems that are unlikely to even show up on your radar.
A pre-purchase inspection can also prevent you from overpaying for a property that’s laden with problems. After the inspection has been carried out, obtain contractor estimates for any problems listed in the results. Next, present these estimates to the seller and request that the cost of necessary repairs/renovations be deducted from the sale price. Alternatively, if an inspection uncovers issues with a property that you lack the resources, bandwidth or patience to deal with, shifting your attention to other potential properties may be the wisest course of action.
Enlist the Aid of a Good Property Manager
If you’re interested in purchasing an apartment building or condo complex that contains multiple units, you should consider hiring an experienced property manager – particularly if you don’t intend to turn property management into your full-time job. As the job title suggests, this person will be responsible for virtually every aspect of managing your investment property. From vetting prospective renters to interviewing maintenance staff to maintaining friendly relationships with tenants, the right property manager will serve as the perfect proxy and make informed decisions in your absence.
It’s only natural that real estate investors would value peace of mind. After all, while real estate investments can prove immensely profitable, they’re far from inexpensive. As such, making an ill-advised investment stands to lose you a considerable sum. Fortunately, putting proper thought and research into your first real estate investment can dramatically reduce your odds of winding up with a lemon. So, if peace of mind is what you’re after, take care to heed the advice outlined above.
Photo by Ярослав Алексеенко on Unsplash