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Adding real estate to your investment portfolio is an attractive option for building wealth and preparing for the future. Investment properties can produce some serious income over the long term, but if it were simple everyone would be doing it. Real estate investment is much more complex than buying stocks and bonds. Before diving into the market, you’ll naturally want to do some homework first. If you’re considering getting into real estate investing, here are some important questions you should ask yourself.
What are your financial goals?
A good first step is to clarify where you want investment to take you. Consider your long-term goals and then shape your actions accordingly. This prevents your becoming sidetracked in the midst of complex transactions. Make sure that every investment you make is a step toward achieving your goals.Are you prepared to begin?
It’s absolutely a good move to understand the basics of investing before you start looking for deals. Just make sure that you don’t get so tied up with reading the experts and attending “essential” seminars that you never get around to taking action. Arm yourself with specific questions you want to answer, get the facts, and forge ahead.Do you have the time to research the good deals?
Finding good deals is a lengthy process. Investors must have time to devote to vetting properties, or access to reliable services that do it for them. A first step is to narrow down your choices based on your own criteria, and not your personal preferences. Then make sure that a thorough financial analysis is done on each potential investment. Essential figures for this process include:- Net income (income/expenses)
- Cash flow (net income/debt financing payments)
- Return on investment (cash flow/investment)
- Cap rate (net income/property price)
- Cash-on-cash return (cash flow/investment)
- Total ROI (total return/investment)
