I’d been thinking for some time about quitting my corporate job and starting a business of my own. Ideally, I wanted to get something going on the side, part-time, before leaving the stability of a regular paycheck behind. I was especially curious about real estate investing and thought I might have a real knack for it but didn’t know if I should just jump in and buy an investment property. It seemed risky and, quite frankly, I didn’t have any inkling of where to start or who to trust. What I did know, however, is that I wanted a career I’d love.
After a lot of internal deliberation, I decided to get out of my head and get some straight answers. At least I knew who to call and was immediately glad I did. Jay, an old colleague who left the corporate grind years ago to start a career in real estate investing, agreed to tackle my questions and address my concerns. So I fired away. My first question, which might be one you’re asking, was “Should I Buy an Investment Property?” His answer said it all.
Should I Buy an Investment Property?
Without a formal education in real estate investing or any kind of hands-on experience to speak of, the idea of buying that first investment property looms large for most of us—no matter how entertaining reality TV makes it look. With the economy on the whole on the rebound, and the housing market following fast on its heels, knowing where and how to find a great investment property feels like an impossible task. As a new real estate investor, it can look like the odds are stacked against you.
But Jay reminded me that it is precisely because the tides have turned that you should consider investing in real estate. The housing market forecast for much of the U.S. continues to look promising, as does the advent of new jobs and rising consumer confidence. With more and more people able to spend, a demand for housing naturally needs to be filled.
Also, in terms of seeing the biggest returns on investments in the shortest amount of time, buying and renovating distressed homes for sale and then selling them for profit, is still one of the strongest investment strategies you can put into action. At the very least, it’s a means to diversify your investment holdings and position your portfolio to weather fluctuating economic conditions. If you hope to quit working altogether someday, investing in real estate for retirement has the potential to safely set you up to enjoy the later years of your life—in some cases, even more so than investing in stocks, bonds, and traditional retirement accounts. Not buying an investment property, then, may carry the risk of doing more harm than good when it comes to improving, and safeguarding, your financial well-being.
What Are the Risks of Real Estate Investing?
On the other hand, there is an element of risk inherent in buying an investment property that makes it a potentially tricky proposition. If you don’t know how to make a good real estate investment and you buy too high, underestimate rehab costs, or miscalculate the After Repair Value (ARV), you could find yourself in financial hot water. The same can be said of skipping a home inspection, working with unlicensed professionals, or forgoing real estate investor insurance. If you end up with a money pit, or a disaster such as flooding turns your property into one, your expected return on investment (ROI) might not be the only thing you lose.
The only way to mitigate the uncertainty associated with real estate investing, and prevent an asset from becoming a liability, is to make smart choices at every stage of buying, renovating, and selling a property. How do you do that as a new investor? Jay had an answer for that too.
Making Confident Investment Choices
As a new real estate investor, it’s that initial training that gets you started on the right track to making good decisions. Whether you decide to invest full-time or part-time, knowing what to look for— and what to look out for—is critical for building an investment portfolio and career. You’ll also need access to some of the best tools available for real estate investment analysis and valuation, like HomeVestors’® proprietary valuation tool ValueCheck® to make confident investing decisions. And, becoming an independently owned and operated HomeVestors® franchisee, like Alan, is the best way to get both.
After hanging up the phone, the choice was clear. Did I buy an investment property? Yes, I did— right after I joined the HomeVestors® team.
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