What to Consider Before Buying Your First Real Estate Investment

Real estate is not as easy as most people think. It is true that for many, real estate served as their path to financial freedom and early retirement. However, it’s not to say that it’s easy. Lots of people found success in real estate but there are also many who found nothing but failure. It is important to note that most of these failures are a result of lack of preparation and misinformation.

A wise real estate investor knows how to weigh and consider every factor that may impact his investments. Before buying your first real estate property, it is essential to carefully consider some of those factors.

Do you have a plan?

Having a plan does not guarantee your success in real estate – it simply guides you on the things you need to do and the steps you need to take in order to achieve a good return on your investment and lasting success in the real estate field. Your plan should cover important questions including your goals and income targets. It should detail exactly how you’re going to realize income and capital gains. To put it simply, your plan will serve as your blueprint to success. Whether or not you achieve that success is a matter of your own execution.

Which type of real estate property will you invest in?

There are numerous types of real estate properties. Each type has its unique features and offers various pros and cons depending on your capital and financial situation.

Real estate investments can be categorized into residential and single family homes, condominium units, commercial and industrial properties, farm lands, mobile homes, vacation rentals, apartment villas, hotels/motels and shares in a real estate investment trust to name a few.

Natural Person vs. LLC

Most experienced real estate investors would suggest to start off your real estate investment by incorporating a Limited Liability Corporation and I would suggest the same. A registered LLC enjoy flexibility and has certain advantages on capital gains taxes. An LLC can also protect your personal assets from possible loss. Compared to investing in your own name, investing with the use of a corporate entity provides a more secure, safe and flexible alternative.

Possible expenses in maintaining the property

You also need to take into consideration the expenses you may incur while you are in possession of the property. If you’re going to lease your real estate properties, there are repairs and maintenance cost that you should be wary of. Flipping houses, on the other hand, requires putting money on renovation and remodelling projects. You should also put into account the cost of marketing your real estate listing.

Financing options available to you

The financing options available to you is dependent on your credit history and financial capacity. Most experienced real estate investors have built lasting long-term relations with banks and mortgage companies. A positive rapport with financial institutions will enable you to avail competitive interest rates and better terms and mortgage payments.

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