Four Things to Consider Before Investing in Real Estate

Real estate agent and investor shaking hands

As more people look for a safe place to put their money, the housing market is becoming an increasingly viable option. This is due to the fact that real estate generally increases in value over time, so people can trust that they’ll make a good return on investment. However, before you join the flock of people eager to become property owners, here are a few things you should consider.

1. Income stability

Investing in real estate is a huge financial commitment and it can take some time before you start earning returns. For these reasons, a stable income is a necessity when venturing into real estate. Before purchasing a property, you’ll want to assess your finances. Are you currently operating with surplus funds? How stable is your income? What are the chances that your income will remain the same or grow within the next six months? These are all questions that will help you determine if you can afford to become a property owner. This will also help you determine whether or not you can survive the sometimes-challenging period between the purchase and the sale/lease of your property. If you’re in good financial standing and have a secure source of income, you may be ready to start investing in real estate.

2. Your credit score

It’s common knowledge that most people will need to secure a mortgage to become property owners. However, before you apply for a mortgage, you’ll want to make sure you have a favourable credit score – a minimum of 640. Your credit score determines the type of mortgage you’ll be approved for and the amount of interest you’ll be required to pay. A few points up or down on your credit score can make thousands of dollars of difference in your yearly interest payment.

3. The state of the real estate market

Before investing in real estate, you’ve got to do your research! Track the housing prices in your city/area of interest. Are they going up or down? If real estate prices are on the decline and there is a surplus of properties, that means a buyer’s market and a great time to make a purchase. On the other hand, if prices are on the rise and there are more potential buyers than property on the market, then it may not be the best time to invest. Knowing the current and forecasted state of the real estate market will help you invest at the right time, thus increasing your chances of success.

4. Types of property

Just as there are different sectors of the real estate industry, there are different types of real estate property. You can invest in everything from residential to retail and commercial real estate, and each come with their pros and cons. For example, owning residential property is the safest bet when it comes to real estate investing. Since shelter is a basic need, you’re more likely to find tenants for your property – allowing you to generate rental income. Before venturing into real estate, you should have an understanding of the types of property available, as well as their benefits and drawbacks. This way you’ll know what you’re in for when you choose to invest.

Real estate investing can be a rewarding venture, and that’s especially true when you take these four key points into consideration before making a purchase.

Looking to invest in residential real estate? We can help!

Get in touch with us today.