The Dos And Don'ts Of Real Estate Investment For Beginners

Posted on: 16 April 2015


These days, investing in real estate is a lucrative option for those looking to make additional money; the potential for income on a real estate property can be quite large, especially for those thinking about flipping a property or renting one out. Still, if you're new to the idea of real estate investment, there are some important things you'll want to know before you get started:

DO Understand Your Personal Finances

One of the most vital aspects of planning for your first real estate investment is getting a true idea of your personal cash flow. Specifically, it's a good idea to track your spending and income for at least a few months. Keep track of every penny you spend, and categorize your spending (utilities, entertainment, and groceries).

From there, you may be able to find ways in which you can free up cash to make a larger real estate investment (or set the money aside for a buffer). Regardless, having a very clear idea of your cash flow will help you plan financially for your investment and make sure you don't bite off a larger piece than you can chew.

DO Prioritize Your Bottom Line

Furthermore, be sure to always have your bottom line in mind when considering a real estate investment. Just because a property is going for a cheap price and you know you can quickly find a tenant to pay $1,000 per month in rent, this doesn't necessarily make it a sound investment.

That's because you must also take into consideration any repairs or maintenance that may need to be done, property taxes, costs associated with finding a responsible tenant, and other expense factors. Rather than looking just at the short-term costs and payoffs, look at your investment in the long-term; how much do you hope to make off the investment in two, five, ten years from now?

DON'T Rush Into Any Deal

Finally if a real estate investment deal seems like it's too good to be true, there's a pretty good chance that your gut instincts are right. Sure, every once in a blue moon, you might be the first to come across a truly great investment opportunity. Most of the time, however, there's probably a good reason as to why other investors have passed up on an investment. Be sure to do your homework and don't rush into any decisions before you're confident in the investment.