How to lower your risk when purchasing investment real estate

Category: Investments

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If you have the money to invest into something, real estate can be a good choice. Like with any other investment, however, here is always some risk involved. If you have been thinking about investing in property, here are some risks that you face and ways to lower them.

 

In the beginning stages, you should decide on how exactly you plan on making a profit. Some people end up remodeling the home and “flipping” it for a profit. The biggest risk with this is that you not only fail to make a profit, but that you actually lose out. The key is to spend money on the right renovation projects. Don’t increase the home’s value to the point where it is far more expensive than the neighboring homes. Work with a local real estate agent to get a feel for the area you’re looking to invest in, and discuss your plans with him or her. A seasoned real estate agent will likely be able to offer you advice on which projects to invest in and which to steer clear of, and how much money you might expect to get when it’s time to sell.

 

If you don’t plan on flipping property, it is likely you are planning on purchasing property and renting it out to a tenant. Depending on how much your mortgage payments are, you could end up profiting substantially from a tenant’s monthly rent. One of the biggest risks that comes with this, however, is your tenant damaging property and/or failing to pay rent, which may eventually end in eviction. To help lower your risk, require that any qualifying tenant(s) come up with a large deposit, which is entirely refundable if there is no damage or missing rent. Your real estate agent should be able to help you decide on what a reasonable amount is for the tenant, but also good enough to protect your home in case of damage. You should also thoroughly look into the tenant’s credit background—don’t rely on the tenant showing you their own copy of a credit report. Instead, run the check yourself. If there are any red flags, you might want to consider increasing your security deposit requirements or declining the individual’s rental application.

 

If you’re receiving long-term annuity payments, a lump sum payout in exchange for your annuity payments can always come in handy, but especially if you’re buying investment property. Not only might you need the money to help buy the property, but it’s always good to have a financial safety net in case it takes a while for your investment to pay off. If you’d like to find out more about receiving a lump sum payout for your annuity payments and for your free quote, contact Peachtree Financial Solutions today.

 

Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.

Tags: loans, Mortgages, Real Estate

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