The recent downturn in the housing market has proven that there is risk involved in real estate investing. Before the “crisis”, real estate was looked at as a guaranteed investment. People were buying property one year and selling it a year later for twice the purchase price. However, in today’s real estate market, investments aren’t as predictable. There is lots more risk involved because of the uncertainty of the economy. Yet the good news is that, somehow, people are still making money in real estate.
There are several things that you should consider before you make an investment in real estate. First, there is always some risk involved no matter how the market is doing. The best advice is to plan for these risks.
Real estate is probably the largest investment that you can make. You will have tens of thousands of dollars tied up in your investment. The first rule of any type of investing is to never invest more than you can afford to lose. Be prepared to hold onto the property and never purchase a property that could render you bankrupt if it doesn’t sell quickly.
Plan for repairs and problems with every investment property. You could be halfway through remodeling and find another problem that needs to be fixed. Plan ahead and budget extra funds for anything that might happen.
Plan for changes in the market and leave some room for that possible change. You might have to sell for less than planned or you may have to hold onto the property longer than expected. Make sure that you are prepared for anything that can happen.
While you’re waiting for an investment to sell, you will not be getting paid. Make sure that you have plenty of money in savings if you plan to invest full time and quit your day job.
There is a big commitment with real estate investing. You can’t be successful without putting in a lot of time and effort. It’s hard work. There is a lot of stress involved: from purchasing, to repairs on the property and anything unforeseen. If you can’t handle stress and change, real estate investing is probably not for you. If you enjoy a challenge and are willing to work hard, you probably have what it takes.
Real estate investing does not guarantee an easy lifestyle or a large income either. There is money to be made in real estate investing, and there are plenty of people who make a lot of money, but there are also those who make very little at it. Sometimes, luck does play a role, most of the time it’s hard work and dedication that makes you successful in real estate investing.
**Some statistical information obtained from: The Denver Housing Authority, The South Metro Denver Chamber of Commerce and www.zingarticles.com.