INVEST IN REAL ESTATE:
 |
With all the horrible things that can happen, you might be thinking why should I risk it all and invest in real estate? I can't afford to lose my life savings... I don't have time to fix things if they break, plus I don't know how even fix things... I am not good at dealing with upset people (tenants).... I simply am scared to take on another mortgage. These are all valid reasons and these are the very reasons that keep new potential real estate investors at bay.
With all of that being said, I am here to tell you that you can invest it all in real estate, you can afford to risk your life savings, you do have time to fix things, you will learn how to fix things, you will be fine dealing with upset people (tenants), and that being scared is is normal and quite frankly if you were not scared thinking about getting into real estate you should consider not doing this. Being scared means your uncertain, but continuing to read this article that means you want something more, you want this to work, you want to invest in real estate.
So scared feelings aside, why should I invest in real estate? What are the benefits of investing in real estate?
 |
1.) Extra Income (cash flow):
One of the obvious reasons that comes to mind when investing in real estate is the added income you will gain from renting out a property. You will be able to use the extra income from the cash flow on your real estate to pay down those pesky credit card balances you have build up, or throw some extra dollars at your personal mortgage each month, or simply treat yourself and your family to dinner every once in a while or take the family on the big vacation you have always wanted to go one. The extra income is why you are doing this! You want to lessen the burden on your checkbook and live life the way it was meant to be lived! |
2.) Forced Retirement Plan:
In general terms investing in real estate is considered a "safe" investment (if there is such a thing as a safe investment). The value of homes are generally stable and appreciate (go up $$) over time. Buying the $100,000 rental property when your 30 and paying down the mortgage with the tenants money over the next 30 years you will end up ideally with $100,000 in equity if not more once your pay it off and hit 60 years old.3.) Having someone work 40 hours a week for you:
Looking above I stated "paying down the mortgage with the tenants money" you thought to yourself, yeah sure the rent I collect pays down the mortgage, but did you ever think about it like this... the tenant is going to work at their job (hopefully they have a job, otherwise we need to talk about your tenant selection) and working a 40 hour work week just so they can get paid and then pay you rent. Think about it they are working to pay you, that's powerful. |
5.) Protecting Your Money (Inflation Protection):
The cashflow of your rental can provide good income, but it's income can naturally keep up with the pace of inflation. If inflation goes up then so can the value of your real estate which ultimately reduces the burden of your mortgage over time. This is why real estate is a great way to hedge against the possibility of rising inflation, which in most cases generally hurts both stocks and bonds which is a common thing people invest in if decided to not invest in real estate6.) Control:
You own this property, you can do with it as you please. In other words you control your destiny in some sense. You bought that property because you thought it would appreciate faster, you show the cash flow gain as an opportunity to better your financial position, you believed you could make improvements to again appreciate the value and return on your investment. The fact is when you buy real estate you are your own boss, you call the shots, you decided what happens and when it happens. That is scary, right?WOW! You have just read the above and think this is great, I want to invest right now and get this party started! Hold on cowboy (or cowgirl), investing in real estate isn't for everyone.
Before taking the plunge, ask yourself these questions:
 |
Do you have a good credit score?
Because if you don't why should a bank give you a real estate loan and think you can pay them back?Do you have a good debt/income ratio?
If you have too much debt and not enough income as it is again why would the bank be inclined to give you a mortgage loan? You barely have enough monthly cash to function as it is.Do you have a good debt/asset ratio?
Do you know what a balance sheet is (personal financial statement)? If not do some reading...Do you have enough savings?
The bank wants 20% down and you have exactly 20% to put down in your savings account, so your good to go right? Wrong, that leaves you with zero working capital. What happens when the roof leaks in the first month or the hot water heater breaks? Where will you get the funds to fix it, because you just spend all your savings on the down payment remember? |
Are you okay with your money being tied up?
You just used your savings for the down payment, and getting that back means selling your real estate, which is easier said than done and generally not a quick process if you are looking for cash in a hurry.Do you know how you will manage the property?
How will you find good tenants? How will you keep track of income and expenses? How will you deal with problem tenants? How will you deal with a maintenance problem?How will this affect your life and/or your families life?
Renting property is great until the tenant calls you in the middle of your workday, or when your in the middle of your son's birthday party. Some issues can wait, but some such as a broken water pipe, or broken refrigerator need attention quickly and almost always without prior notice.--
America's Favorite,
The Small Time Investor
Comments
Post a Comment