Today I am sharing some things to consider before investing in real estate, as things have changed a lot in recent years. Twenty years ago, real estate investment usually meant buying a run down house and flipping it to sell it for a profit. Alternatively, some investors would rent out their newly acquired properties.
Nowadays, you can invest in property companies who do all of the hard work for you. So with that in mind, today I am sharing 3 things to consider before investing in real estate. I will cover aspects including house flipping, property investment and becoming a landlord.
*This is a partnered post
Things To Consider Before Investing In Real Estate
When I was a child, my Dad was always flipping a house. He was a joiner by trade and worked 8-5 through the week. As well as this, he spent a lot of his evenings and weekends working on the house he was currently flipping. This work was a labour of love, and he’d make a few thousand pounds on most of the properties.
This came at a great cost though – he rarely saw his partner or children, and socialising was rare. The workload involved with taking on a DIY house flip is definitely worth considering before investing in real estate.
Things have moved on since then, and now you can be involved with real estate investment without being a millionaire or spending every spare minute fixing up a place yourself.
Flipping Rundown Houses
If you are considering buying a run down property and then flipping it to sell on… Be sure you’re aware how much work is involved. Sure, a few coats of paint and some new flooring won’t cost that much in time or money. However, should you need to rewire the electricity or replace the plastering… The costs and the time involved will skyrocket quickly. Definitely plan for issues like this before investing in real estate.
Additionally, flipping properties to sell on depends on you finding a buyer quickly. Otherwise, your expenses will eat up all of your profit. So it’s a gamble if you need to take out a mortgage or loan to purchase or fix up the house. Bills will also keep coming in, while the house is sat empty, so think about that risk before investing in real estate.
Rental Property
If you decide to keep the property and rent it out, you’ve got the added risk of finding good tenants. Additionally, you’ll be responsible for repairs and damages. You can get Landlord Insurance to cover these, but your premiums will go up with each claim, so it’s something to consider. The fact you will own the property and it’ll be some financial security is a big plus though. If I could afford to buy, renovate and then rent out properties… I’d definitely be opting for that when considering investing in real estate.
Using A Property Investment Company
If you have a lump sum of over $5000, you may want to consider real estate investment as a more viable option to house flipping. This option sees you handing over your money to an investor for a minimum of 10 years. So only consider it if you’re sure you won’t need the lump sum back before then. The fact you can’t access your funds sooner definitely needs serious consideration before investing in real estate this way.
On average, most investors will see a return of 6-15% on their investment. So if you hand over $10,000 you can expect to make anywhere up to $1500 during the 10 years your money is tied up. This Cardone Capital review explains the ins and outs of how it works far better than I can, so check it out to learn more.
The risks involved definitely set off alarm bells for me. So I don’t think I’ll be handing over any money to real estate investors any time soon.
Finally, if this post on things to consider before investing in real estate has been useful, check out this post on saving for your financial future.
