Thinking About Investing in Real Estate? Read This First
If the thought of investing your money into brick and mortar excites you, join the club. Nearly a third of Americans consider real estate to be the best place to park money they don't plan to use for at lease 10 years.
But how do you know if you're well-suited to take advantage of these real estate investment opportunities? Here are three signs that owning a rental property could be right for you.
YOU'RE A HOMEBUYER WHO WANTS HELP COVERING THE MORTGAGE
Increasingly popular with first-time homebuyers, "house hacking" involves buying a property you intend to live in while renting out a portion of it to tenants.
This untraditional real estate investing doesn't usually require as high a credit score or as large a down payment to secure a mortgage.
The rent you collect can help cover your homeownership expenses. It also entitles you to certain tax benefits and deductions available only to landlords.
YOU'RE AN INVESTOR LOOKING FOR STEADY AND RELIABLE INCOME
If you don't want a live-in tenant but still desire an additional stream of income, a dedicated long-term rental property could be a better option for you. Purchasing a rental home can also add diversity and stability to your investment portfolio.
The value of real estate has historically risen over time. However the rate of appreciation can be hard to predict, so it's prudent to invest in a property that also offers positive cash flow, which means the rent you take in exceeds your expenses. This strategy ensures money in your pocket each month even if the property's value takes time to grow.
YOU'RE AN EXPERIENCED INVESTOR LOOKING TO MAXIMIZE YOUR POTENTIAL RETURNS
Another popular way to draw income from an investment property is to convert it to a short-term rental. If you find the right property, you can earn significantly more renting it on a platform like Airbnb than to a long-term tenant.
But beware: This strategy can be riskier as certain municipalities have tightened restrictions and others are suffering from market oversaturation. The vacation rental market enjoyed a boom during the pandemic, and some inexperienced investors are finding they bit off more than they can chew. As a result, there's an opportunity to snap up some of these properties, but you'll need capital and a willingness to learn the business.
We can help you scout opportunities in our local market or, if you're interested in investing in another area, we can refer you to an agent there for assistance.
