Five Tips for Getting Into Real Estate Investing

If you are looking to diversify your investment portfolio, take a look into real estate investing.  While a big commitment, returns for investments in real estate can be significant.  It’s a major commitment that takes a decent amount of cash upfront so it helps to know a few tips before you get started.

Stay Local

For your first real estate investment, it’s important to purchase where you live.   Even if you plan on hiring a management company to take care of the day to day issues, it is helpful to live in the same town as your investment.  No one cares like the owner of the property.  Being close by to keep tabs on your new investment is sure to grant you some peace of mind.

Hire an Agent

Real estate agents are a helpful asset to have when considering investing in real estate.  They know the local market well and can point you in the best direction.  They can also help by explaining any potential hurdles that might come up.  Working with an agent early on allows you to build a trusted relationship so you can be confident you are getting a great deal when it comes time to purchase.

Prepare for Risks

Investing is never a sure thing.  A real estate investment can have some pretty big risks.  Properties might not get rented quickly which can put a burden on cash flow.  Damage and repairs come up unexpectedly.  It is a great idea to set up an emergency fund for your investment properties to cover these unexpected expenses.

Keep Diversifying

Diversifying an investment portfolio is common sense. Make sure you are diversifying your investments by continuing to contribute to retirement accounts such as 401(k)s and IRAs.  Within these accounts, you can invest in real estate products like REITs but make sure you are never too heavily weighted in the real estate category ensuring your portfolio could weather an economic downturn.

Pay In Cash

Going into debt to invest is a recipe for disaster.  Real estate investing is risky. Do not compound the risk by taking on debt to finance an investment in real estate.  It may take some time to gather the necessary funds to start investing but it will provide you with a much less risky foundation and allow you to fully enjoy the returns.

While not for everyone, investing in real estate can provide significant returns.  If you are considering getting started, make sure to sit down with a financial professional who can give you advice on your specific situation.

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