Considerations I Made Before Investing in Real Estate

I had wanted to start investing for years, I loved the idea of placing my money into something and making a profit from money itself rather than working and receiving a salary. The problem for me however was that for many years, I simply couldn’t afford to siphon off any of my earning to take a chance on investment. About 4 years ago I decided that I was in a position to start saving big with a view on investing in real estate. I had been told by people around me, including Chase Rubin, my buddy who works in the real estate industry, that bricks and mortar was where my investment cash should go. I was a little scared at first and unsure whether I could part with such a large chunk of money so before I got things going with my investments, here’s how I took the decision.

How Much I Could Afford

The first question I had to ask myself was how much I could honestly afford. I had managed to save up just under $100k but I knew that investing all of it would be a ridiculous idea. I tried to think about the absolute worst case scenario here, let’s say I invest $70k in a property and the market plummets and I cannot rent it out nor sell it for any more than $35k. Can I honestly afford to lose $35k? The answer was no and so I opted instead to invest $60k and keep a further $40k for any work that I had to do on the house, fees that I’d have to pay and of course, some rainy day money. Thankfully the worst didn’t occur but I was still pleased that I erred on the side of caution.

What Kind of Investment

The next thing that I thought about was what kind of investment I wanted to make as with real estate there are a few different options available. I wanted to make a quick profit so I decided to flip a house, I picked up a cheap house at auction, invested some cash into brightening the place up and then sold it just 4 months later. I could have gone more long-term and rented a property out but I wanted the money quick so that I could buy another property.

How Much I Knew

This is one of the key considerations that I made before getting involved in real estate. It isn’t until the time comes to heavily invest in something that you realize how little you know about a subject and whilst I thought I knew about the industry, it turns out that I really didn’t. Before I parted with any money at all I spent 6 months learning about the housing market, how it operated, what caused it to move and which was the best method for me to make money. There was so much that I didn’t have a clue about and without spending this time on learning, I would never have made any money.