People often wonder if they should invest in real estate. Depending on who you ask, opinions will vary. Real estate investing can be a lucrative and rewarding venture, but it’s essential to tread carefully and thoughtfully because not everyone is cut out to own real estate. But there are several ways to invest in real estate successfully.
Read below to discover some factors to consider when deciding if you should invest in real estate. By understanding and carefully weighing these elements, you can position yourself for a more informed and strategic approach to real estate investment.
Consider your personality and skill set
Owning real estate can be time-consuming, and at times, fraught with headaches. Even worse, it can get expensive, as you’ll need invest more money to maintain the property. So, if you’re someone who doesn’t like dealing with issues and aren’t very handy, there are likely better investment choices out there.
On the other hand, there are some individuals whose personalities and skill sets fit well with owning real estate. If you like working with people, you’re handy and are able to maintain the property yourself, or have connections to good trades people then owning rental properties might be a good choice.
Be aware of the conflict of interest
There’s generally a conflict of interest with real estate investments when working with financial advisors. Many are not licensed agents or their employer doesn’t allow the advisor to sell real estate directly. In these situations, your advisor will only recommend real estate investments through publicly traded real estate investment trusts (REITS). That said, if you want to own investment real estate directly, your financial advisor might not be able to help or will try to steer you in a different direction.
This type of situation is where a fiduciary would come in. A fiduciary is a financial advisor who is bound by law to act in their client’s best interest. Fiduciaries face this conflict of interest, too. However, they’re still expected to provide guidance that benefits their client regardless of whether it’s detrimental to their own compensation.
State of the real estate market
The current state of the real estate market is another factor to consider when contemplating real estate investment. For example, the market is high right now and interest rates have doubled over the past year. Therefore, you may want to tread carefully and play a wait and see game in the event of a price correction.
Additionally, contractors are in high demand these days so the cost to hire these people are expensive. And the cost of raw materials has skyrocketed in recent years. As a result, it might not be the best time to invest in real estate. As with any investment, don’t let recent returns entice you in, tread cautiously.
One situation where investing in real estate seems to work extremely well regardless of the ups and downs of the real estate market is for young investors. For example, recent college graduates or tradespeople who invest in a multi-family fixer-upper tend to do very well over the long run. They reside at the property while fixing it up. Then, they flip it and move on or keep it for a long-term investment. This scenario is a great way to build equity and make money in real estate
How to invest in real estate
Real estate can be a very good investment whether you own it outright or through a real estate investment trust. If you’ve considered all of the factors discussed above and still have questions, contact us today! We can help tailor advice based on your unique situation.
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