Bigger Pockets has an article for those thinking of buying real estate rentals. Scott Trench asks “Newbies: Wonder if You’re Ready to Buy a Rental?” Most people might start out asking is this a good time to invest in real estate? Trench asks, Is now a good time for *me personally* to purchase buy and hold investment real estate, and will buy and hold investment real estate help me achieve my financial goals regardless of short-term future market conditions?
“Whether or not you are ready to invest in real estate depends upon a number of factors going on in your life. And these aren’t just financial factors. See, real estate is what I like to think of as a “semi-passive” business. Think of it as a hobby that takes a couple of hours a week, but a lot more time/effort/money up front. If you pay high up front and are prepared to cover consistent, long-term cost, you might create an incredible positive effect in your life. If you don’t, you are setting yourself up to get royally screwed.”
Trench lists four factors in your life that determine whether or not you prepared to benefit from the purchase of investment real estate.
Your Personal Financial Position –You must have a strong personal financial position prior to purchasing investment real estate,
- meaning a strong balance sheet consisting of few bad debts and have not only the down payment for the next real estate property saved up (in cash!), but tens of thousands of additional dollars (also in cash!) ready to go to pay for unexpected things like repairs, maintenance, and six months of mortgage payments when the tenants don’t pay.
- A long history of positive cash flow, meaning spending significantly less than he/she earns and has done so for years in a row, without any significant interruptions.
We are not talking about an individual that is just getting by each month, whose only assets are equity in the home and a retirement account, is unable to save, and has little in the way of emergency cash on hand.
Knowledge and Commitment to Learning – Real estate is a business that requires continuous learning. It is literally a lifetime commitment to knowledge accumulation as it pertains to general business practices and the specifics of real estate in your target market.
If you aren’t prepared to put in a huge upfront effort in self-education and then continuously stay sharp on the fundamentals of business and real estate, you are setting yourself up for failure.
Commitment to the Area You Are Investing in – You are tying yourself to a physical location and to people and a network. Your area is the one place you can be the expert, you have the inside information about your area and can profit from that information.
Personal Life Conditions – This means that you will have to forgo other things like extra hours at work, leisure activities like hiking/skiing on the weekends, or hanging out with your kids. Real estate will dominate that time in its place.
If you believe that making a significant time commitment to stabilizing your next real estate investment over the next few months will be a struggle, then I believe that the conditions in your personal life will make real estate investing a poor choice for you.
Ready to buy a rental? If you have a strong personal financial position, have built up a large amount of real estate knowledge and plan to continue reading, networking and learning, and are committed to being physically present in the location that you choose to invest in, then you are in good shape.
If not, but want exposure to real estate, why not talk with us about passive ways to invest that offers greater returns than the banks.
Coal to Cash Homebuyers, Inc. is a cash buyer solution. We are here to help homeowners out of any kind of distressed situation. As investors, we are in business to make a modest profit on any deal, however we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple honest truth about your home and how we can help you sell it fast to resolve any situation.
