Doubt can be a powerful, powerful feeling.
The seed can be small, but it can grow out of control in our minds. We can second-guess important decisions and stop ourselves from making the choices that are in our best interests.
Those are the choices that will spur us on to success in real estate investment!When it comes to arguably the biggest decisions...we make as real estate investors—buying investment properties—wouldn’t it be nice to feel sure? While we can’t predict the future, we can look to indicators that the decision we’re making is the right one for our investing future.
6 Indications You Should Buy An Investment Property
The Numbers Add Up
The most important thing to consider before you go through with an investment property deal is the numbers. Crunch those numbers. There is a lot that goes into that. It means not only weighing the cost of the property versus the projected income you’ll make in rental payments, but it means considering ongoing property maintenance costs, factoring in insurance and management, renovations, mortgage and interest rates, utilities...basically any costs associated with the property.
Does your investment make sense? Will you be getting good returns? Remember: you want cash flow. That is the ultimate and most important thing about investing in real estate.
The Market Makes Sense
The market. It matters, and it matters a lot. You have to investigate the market overall, and then you need to look at your individual neighborhoods. What are the projections for your area? Is there population growth? New construction? Economic stimulation? Looking at the direction your market is headed is crucial for the long-term sustainability of your investments.
You also have to consider your individual neighborhood that you’re investing in, just like you would if you were buying a home for yourself. (That said, just because you would live there doesn’t mean it would make a good investment property!)
Think about amenities. Think about local area values. Think about where you want to be and what kind of investments you want to hold! Does your deal make sense with those goals?
You’ve Found a Truly Good Deal
Sometimes, you just find a good deal. Once you’ve been in the game for awhile, it becomes pretty clear when you’ve stumbled upon one. When you’ve found one of those gems, you just have to pull the trigger.
You still have to do your due diligence. Don’t get so excited about a deal that looks good that you ignore the proper process. It has to be a truly good deal. And you don’t know if it’s truly good until you do your due diligence. Don’t skip steps.
You’re in a Place to Expand Your Portfolio
This is less about the deal itself and more about where you are as a real estate investor. Some new investors make the mistake of jumping too quickly into new deals. Yes, you should grow and expand your portfolio! Creating multiple streams of cash flow are the way to succeed in real estate investment.
If you scale too quickly, whether it’s before you have enough of a safety net built up or too much debt weighing you down, it could lead to trouble if you find problems with your new investment property. Allow yourself time to build up defenses in case of trouble.
The Risk is Reasonable
We mentioned due diligence—and next to running the numbers, it’s the most important piece of the puzzle! Are you weighing the risk? In real estate investment, there is always risk. If you do your due diligence, you can mitigate that risk and better ensure that your investment will be a solid one.
We all have a different threshold for risk—only you can decide how much you can tolerate and how much you can’t.
You Have a Vision
We always warn investors of falling in love with a property. Before you buy, it can cause you to buy a property you shouldn’t. After you buy, it can cause you to pour money into a property that perhaps you should let go of. That said, you should be able to visualize a future for the properties that you buy. What role do they play in your portfolio? What renovations do you see yourself making?
Do the inspire you as an investor in some way? Do they feel right in your gut? While numbers are of utmost important, don’t ignore a bad gut feeling, either!