The 5 Most Important Factors for Real Estate Investing
If you're thinking about getting into real estate investing, it's important to understand the most important factors that will affect your success. There are many things to consider when making an investment, but these five factors are key: location, market conditions, property type, financing options, and your own personal situation. Let's take a closer look at each of these factors.
Location
Location is critical in real estate investing. You should choose an area that is growing or has potential for growth. It's also a good idea to look for areas that will 'cash flow' (your profits from rent will cover all mortgage and other expenses and you will have a little $ leftover). Look at demographics, job growth, and other indicators to find a good location.
We also love to look at what is nearby; schools, government buildings, military bases, large company headquarters, universities, and hospitals can all be good indicators that it's a stable location where people need housing.
Another interesting tip is to invest where there is a Starbucks! Weird ... I know, but some studies have shown that it's a good indicator of a profitable and growing location.
Market Conditions
Market conditions play a big role in real estate investing. You need to understand the local market and know whether prices are rising, falling, or staying the same. Look at the overall economy and housing market trends to get an idea of where the market is headed.
However, having said that - you cannot time the market. You know what they say: it's all about TIME IN the market, not TIMING the market.
You should always keep an eye on market conditions but also just learn to analyze properties well so that you can see if it makes sense to buy a property in a certain location at that time. If the numbers work, then you're usually good to go! No need to be scared of whether prices will rise or fall. So many people spend years waiting to buy a property and never do - there never is a perfect time so just do some research and jump in.
Property Type
Property type is another important factor to consider. You can choose to invest in residential or commercial property, or even land. Each has its own risks and rewards, so you need to carefully consider which type of property is right for you.
Many people start out by buying single family homes, and then work their way up to small multifamily properties. Then some people get into large apartment buildings or commercial real estate! There are so many types of properties and pros and cons to each. It can be good to start small while you are learning because there can be less money / less risk involved. Then you can use your equity in these deals to get bigger ones if you wish!
Financing Options
Financing options are another key factor in real estate investing. You need to choose the right type of financing for your situation and be aware of the interest rates and fees associated with each option.
This one is where many people get stuck. It's hard to come up with big chunks of cash for a downpayment! If you save for 10 years, inflation will ensure that you are priced out of the property you were saving for. A great way to get around this is by working with other people in Joint Venture agreements. Some people don't have time to invest so they like to be more passive, and you can partner with them and do all the work and split the profits! You can also get investors to lend you money for a property - they get a good return on their money while you get a property. There are also deals you can make with the seller where they hold all or part of the mortgage for you. There are tons of ways to get around the financing problem so get reading and learning and you'll have a solution in no time.
Your Own Personal Situation
Your own personal situation is also an important factor to consider. You need to have a clear understanding of your financial goals, risk tolerance, and time horizon. Think about how much time and money you have to spend on an investment property, how risk averse you are, and what you want to get from this investment. These factors will help you determine which type of real estate investing is right for you.
If you're thinking about getting into real estate investing, keep these five factors in mind. Location, market conditions, property type, financing options, and your own personal situation are all important things to consider before making an investment. As always, feel free to reach out to us if you have any questions! 😊