Investment property can be a very good business if you set yourself up properly. That means doing the research, having your finances in order and being honest about how much time you can give it.
If you think you’re ready to buy your first one, here are three things to work through before you make an offer.
1. Understand the risks first
Real estate can pay well, and it can also go wrong in predictable ways:
- Tenants who pay late or leave early
- A flip that takes longer to sell than you planned
- Repairs that didn’t show up in the inspection
None of these should stop you from investing. They should shape your plan. The simplest protection is a cash reserve, money set aside for the months when something breaks or a unit sits empty. If you know the risks going in, you can deal with them when they arrive.
2. Make sure the property will deliver a return
If a property won’t give you an acceptable return on the money and time you put in, don’t buy it. That sounds obvious. It’s also the rule first-time investors break most often, usually because they’ve grown attached to a particular house.
For a first purchase, keep it manageable. Choose a project where you understand the costs, the work is within reach, and the return is realistic. You can take on something bigger once you’ve done one. Our post on what to look for in a real estate property covers the basics of evaluating a deal.
3. Choose your partners carefully
You won’t do this alone. Depending on the property and your plan, you’ll work with some combination of a builder, a contractor, a property manager, an agent and a lender.
The people you choose have a large effect on the outcome. Look for a proven track record, ask for references and work with people you’d trust with your money, because that’s what you’re doing. This applies to lenders too. See our 3 qualities to look for in a private money lender.
Start with the right lender
Can you build real wealth in real estate? Yes. It takes research, hard work, an understanding of your market and good advice.
Sachem Lending provides financing for real estate investors, with no upfront fees. Have a look at our loan programs and FAQs, or call us today.
