Questions to Ask Before Investing in Real Estate

Investing in real estate can be a great way to get extra income, but there are some key questions to ask yourself before buying that investment property. Whether it’s your first time investing or you think you’re an expert, finding out these answers will put you in a better position. Learn what to ask yourself when investing in a property and prepare to hop into the market!

Are you financially ready?

One of the biggest considerations of investing in anything is your finances, and it’s no different in real estate. You should know the details of your income, assets, and debts. This will help you find out if you can afford the initial costs of investing, like a down payment and closing costs. If you’re having difficulty financing your current lifestyle, it’s probably not a good idea to go and buy another property.

Don’t forget about the long-term costs associated with ownership, like taxes, insurance and mortgages. And just like with a home you live in, unexpected problems will happen to an investment property. Investors need to have funds to spare to cover surprise maintenance costs.

Do you have the time to maintain another property?

Maintaining another property requires time and dedication—but do you have the time to spare? If you’re already juggling a full-time job and other commitments, you likely won’t be able to handle the additional responsibilities of owning an investment property.

When estimating how much time you’ll need, factor in seasonal maintenance, such as preparing for the winter months or dealing with summer storms. Plan for regular interior and exterior maintenance, like mowing the lawn or painting the walls. Plus, you’ll need to be available to respond to tenant concerns and handle any emergency repairs that may come up.

However, just because you don’t have the time for maintenance doesn’t necessarily mean you shouldn’t invest. You can hire a property manager to handle the upkeep on your behalf, though that’ll be an additional expense, and you’ll have to take the time to find a good one.

What’s the real estate market like?

Even if you’re financially ready to invest, it might not be a good time on the market. Make sure to consider the national and local markets, as both can give important information. Research points like:

The average cost of real estate in your area
The recent trends in the local market
The overall health of the economy
Any tax or legal changes that could impact your purchase
The local demand for rental properties

Looking into these details can give you a better idea of the market and help you make a more informed decision. For even more insight, you can reach out to experienced real estate agents and investors. They may be able to suggest considerations you hadn’t thought of.

Have you researched the property?

Before you even think about making an offer on a property, you should put some time into researching it. You can find out the answers to questions like:

What’s the condition of the property?
What’s the neighborhood like?
Has the property experienced high turnover, either with tenants or owners?
Are there any restrictions or zoning issues?
What’s the area forecast for future growth?
What are the prices for similar properties in the area?

Answering these questions can give you a better idea of what you may be getting into, helping you make an informed decision. Additionally, it can help you calculate how much you’re willing to offer on the property.

Are you thinking about the future too?

Considering the future is just as important as evaluating the present when investing in real estate. Taking a long view and thinking about the future of the property and yourself can help you make an informed decision. Consider the potential for development, local infrastructure, and other factors that could affect the property’s value in the future.

In addition to the property’s value, these things also impact your rental income. Research the local market and investigate the potential for increasing rental income over time. Look at the condition of the property and the potential for renovations and upgrades that could enhance its rental value.

And outside of the property, think about your future. For example, if you want to move soon, you might not want to invest in a property in your current town, unless you’re comfortable with it being a distance away. Or, if you’re expecting major life changes in the next years, then you may want to wait altogether.

Are you ready to invest?

Before you get involved in the real estate market, you’ll want to ensure you’re ready. It can be a big financial and time commitment, and you don’t want to find out the hard way that it wasn’t the right time for you to invest. By taking the time to research the property and the real estate market, you can maximize your chances of success.

Questions to ask yourself before investing in real estate was last modified: November 8th, 2024 by Billy Guteng

Written by Billy Guteng. October 19, 2023

Billy is a content writer for Kukun. He was born in France, and has lived in multiple cities around the world ever since. He loves art, design and architecture as well as construction and real estate.