Investing in real estate may sound like a daunting proposition to those without experience, but anyone with the capital can be a profitable property owner. The key is to ask yourself some tough questions before putting time and money on the line. In this volatile market, property ownership is often one of the safer routes, but that doesn't mean it's without risk entirely.
Read on for three things you should consider before investing in real estate.
Is now a good time to purchase a commercial property?
Though the ideal time for real estate investments will vary from investor to investor, theoretically, yes. Now is as good a time as any to purchase commercial property. However, you need to make sure of a few things first. Real estate guru Frank Haney recommends that every potential investor ask himself: Do I have the capital to buy land outright? This is not the time to seek loans or put your credit on the line. If you do have sufficient funds, you should also be aware that there is some risk involved in buying property.
Though property tends to be safer than other investments, it is not entirely fool proof. Whether you put your funds into a 401K, commodities, or land, that money is not in your pocket. Do your homework. Research land value, economic trends, and real estate forecasts for the region before pulling the trigger on a decision as big as property investment.
How much time and effort can you dedicate to this investment?
This step essentially comes down to a cost benefits decision. For example, purchasing a plot of land will likely cost the least, but could require years of construction and management if you choose to build on the purchased space. In contrast, a commercial building already filled with tenants will cost more upfront but you will probably experience fewer maintenance and construction costs. Finally, you can opt to save money and manage the property yourself, or you can invest in a management company to oversee everything.
Figure out before committing to a purchase how much capital you are willing to invest in a project and how much time you can spare on the different types of real estate.
What are the risks?
There is always an element of risk involved with investments but real estate is one of the safer bets these days. Avoid losses by considering the tax implications of the property you are looking at. Even if up front costs seem reasonable, taxes can become an unexpected burden and decrease profits over time.
The real estate experts at the Frank Haney Company advise those new to the process to do significant research and consider the neighborhood as a whole. Is the area slated to undergo any significant changes over the next year or two? What about the next fifty years? You can't predict the future, but it's good to stay on top of regional trends by analyzing demographics, slated construction projects, and anything else that could affect the value of property in the area.