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3 quick principles for real estate success
You have probably already heard that real estate can be an excellent way to build wealth over the long term. Rental properties can give you a monthly income, while at the same time you can profit from any increase in your property's value over many years. You can also enjoy the benefits for your taxes. However, there are many things you should keep in mind if you're considering entering the world of real estate investing
Here are 3 quick and easy principles to help you succeed in real estate investing.
1. Prepare yourself financially before investing
One of the drawbacks in real estate is a possibility of short-term downturns in the marketplace. In any given year, the real estate market can suffer, and your property's value can decrease significantly. At the same time, your rental income could decrease for a while, especially if you have trouble filling vacancies for any reason. During this time, you are still responsible for the mortgage payments and the maintenance of your properties. Are you prepared to weather these difficult times financially?
This is why many real estate professionals suggest that you begin by saving money over the long term and slowly begin to invest in real estate, while making sure not to over extend yourself (especially in the beginning). Also, you should evaluate your current financial situation, including all of your present income and expenses, in order to understand whether you really are writing to enter this field. You may want to make sure that you have adequate insurance coverage for your family as well as an emergency fund to pay your living expenses for several months in case something happens to your income.
2. Never underestimate the value of excellent credit
Most people are not able to invest in real estate without the help of a bank or other lender, especially when they are just getting started in this industry. As a matter-of-fact, banks typically want you to put down about 20% of the purchase price as a down payment. If you're going to use other people's money, you need to have good credit in order to obtain the best interest rates (or any loan at all).
If you have poor credit, you may have to delay your real estate dreams until your finances improve, or you may have to settle for higher interest rates and other requirements like private mortgage insurance.
3. Understand that investing in rental property is not for everyone
Do you have the time and personality necessary to invest in rental properties? Do you get upset easily when faced with challenges like those you will inevitably face as a landlord? You can always cultivate an interest in real estate investing, but then again it simply might not be for you. There are also other ways to manage your investments, such as hiring a good property manager or investing in real estate mutual funds. Either of these options can help reduce your hands on involvement.
