Starting a real estate investing business does sound like an intimidating decision. While it is definitely one of the best ways to make money, there are so many real estate questions one needs to answer before knowing whether he/she is ready to take on this journey. Let’s take a look at what real estate questions you should think about if you are considering buying a rental property and becoming a real estate investor:
1. What is my budget?
For any investment, including real estate investing, you first need to know how much you can afford spending at the very beginning, i.e., what your budget is. The answer to the first among the many important real estate questions depends on your savings and your monthly income. While it is advisable to pay at least a 20% down payment on your investment property, make sure you don’t go broke since the start. You will need more money to close the deal and keep going.
2. What are my financing options?
While we are on financing, let’s talk about other financing options in addition to your own savings and income. If you are not paying fully in cash, you will need to take a loan in the form of a mortgage from the bank, from friends/relatives, from other real estate investors, or from any other reliable source with reasonable interest rates and conditions.
3. What is the best location for my income property?
#3 among the most important real estate questions concerns the location of your future investment property. You need to perform a careful real estate market analysis of potential locations before being able to decide on the best place in your case. For first-time investors, it is advisable to go into familiar markets to avoid unneeded surprises.
4. Is out-of-state real estate investing good for you?
Related to the location of your property, you should also ask yourself about the option of going for out-of-state real estate investing. Investing beyond the 20-mile radius is one of the ongoing real estate questions in general. While it complicates matters because of the need to travel (spending both time and money), it frequently offers opportunities unavailable in your local real estate market. If real estate market analysis shows that a location outside your city or even state is the best option at the moment, don’t be afraid to try it out. Just make sure to factor in the additional costs associated with it.
5. What kind of property is the best for you?
Another among the real estate questions you need to investigate is what kind of property is most appropriate for you. If you are just starting your real estate investing career, go for something cheaper and simpler. It is better to start with a single-family home and then move to multi-family properties as you gain more experience.
6. Are you ready to be a landlord?
In most cases, having a real estate investing business is not only about being a real estate investor but also about becoming a landlord. And to be honest, that’s not a job for everyone. You have to be very organized in your work and to be very affirmative with your future tenants in order to succeed as a landlord without constant headaches. So, another of the many real estate questions you should think about before buying a rental property is whether or not you are ready and willing to be a landlord.
7. Should you go traditional or Airbnb?
There are two main ways of renting out an investment property: traditionaland Airbnb. Both have pros and cons, and we cannot neglect the rising trend of short-term rentals in the real estate market. In order to give an answer to #7 in the most important real estate questions, you should factor your personal preferences, your skills as a landlord and an Airbnb host, your property (some rental properties are just better for traditional and some for Airbnb), and your location. If you decide to go for Airbnb, make sure you study the local legislation in this regard.
8. Should you go on your own?
You can invest in real estate either on your own or with other investors. Actually real estate partnerships have numerous advantages, especially for first-time buyers and investors: additional financing, more experience, various expertise, sharing the investment risk, sharing the workload, etc. Of course, they also come with some complications: sharing the profit, dealing with partners, risk of being cheated, etc. Having said that, you should also know that there is nothing wrong with investing on your own if you can afford it and are knowledgeable enough. So, that’s definitely one of the real estate questions to give some thought to.
9. Should you use professional property management?
Real estate investing does not finish with buying an income property. This is just the beginning. Once you’ve purchased your rental property, you have to manage it. This includes finding, retaining, and dealing with tenants; doing fixes and maintenance works; dealing with taxes and legal issues; etc. You can do all these on your own or you can hire professional property management, which however comes at a price. So, you should answer this one among the real estate questions after considering your budget, your expected cash flow, and your time availability.
10. Should you stay at your full-time job?
Well, that’s maybe the only of the real estate questions with a clear answer: YES! If you are just entering the world of real estate investing, do not by any means leave your permanent job. After all, that’s your secure source of income, at least until you get enough experience and enough rental properties to guarantee yourself a good rental income. That’s actually one of the best things about real estate investing: that it can be a part-time job, so it acts as an additional, complementary source of income. Of course, once you’ve grown enough, you can decide to become a professional real estate investor and make even more money than in your 9-to-5 job.
While there are many, many real estate questions one should think about before jumping into buying an income property, above is a list of the 10 most important ones. Try to answer these as clearly as possible before you confirm that you want to become an investor.